Washington, D.C. – Final regulations announced by the Obama Administration and the Department of Education will add new consumer protections to bank accounts and prepaid cards used to access student loans. These new protections will ensure that students can access their student loan proceeds without incurring confusing or excessive fees and improve student choice when selecting a bank account to deposit the proceeds of their loan.
The new Department of Education rule will:
- Prohibit fees such as overdraft fees and transaction swipe fees for bank or prepaid card accounts offered by academic institutions or any contractors that work with them.
- Prohibit academic institutions from requiring students or parents to open an account at a specific institution that may have a financial relationship with their school to receive student aid refunds.
“High and variable back-end fees such as overdraft fees shroud the total cost of basic banking services at the very time students need a transparent, low-cost account,” said Tom Feltner, director of financial services at the Consumer Federation of America. “Due to the Department of Education’s effective regulation, overdraft and confusing fees will be eliminated. This will ensure that much-needed financial resources go where they are most needed – to supporting a successful academic career.”
CFA is a nonprofit association of more than 250 pro-consumer groups that was established in 1968 to advance the consumer interest through research, advocacy, and education.