ED Takes Next Steps in Developing App Payment Vehicle
10/29/2018
Nov. 12, 2018 update: The deadline to submit proposals has been extended from November 7 to November 30, 2018)
The Department of Education’s Office of Federal Student Aid (FSA) plans to enter into one or more cooperative agreements with companies and/or banks to provide a student-focused electronic payment vehicle account program.
This payment vehicle, part of ED’s Next Generation Financial Services Environment, is designed to provide a no-fee payment option to participating students, streamline schools’ processing of Title IV credit balance refunds, and promote the interaction between FSA and borrowers. It would be integrated into ED’s myStudentAid mobile app, which currently includes FSA’s mobile Free Application for Federal Student Aid (FAFSA) and other functions. The underlying account would accept both Title IV and non-Title IV dollars.
After ED identifies one or more pilot implementers, it will reach out to schools to gauge their interest in participating in the pilot. FSA will consider input from the pilot implementers when selecting schools, though students at the selected schools will not be required to participate in the pilot program. Students participating in the program will receive both a physical card and a virtual card powered by the myStudentAid app.
The program’s requirements will create a Tier Two arrangement between participating schools and the pilot implementer(s). Tier Two arrangements are defined in the cash management rules as those between a college or university and a bank or other financial institution under which accounts are offered and marketed directly to students. Depending on the number of students receiving Title IV credit balance refunds, certain rules will apply.
The requirements include no credit checks for students and zero customer liability. Additionally, the pilot implementers will work with schools to ensure that the interchange rate for tuition, fees, and school-owned merchants such as bookstores and cafeterias will be assessed at $0 or 0 percent. If interchange fees are charged, those costs will be reimbursed to participating schools. A comprehensive no-fee “in-network” ATM capability must be available, as well as no-fee “out-of-network” capability for the physical card and companion app.
Functions to be built into the myStudentAid app will need to include:
- ATM locations, account status, and current balance
- Digital receipts and statements
- Spending limits/budgeting functions and spending history
- User’s ability to manage spending by geographic location, merchant code, or dollar amount
- Direct connectivity to a payment authorization stream for real-time transaction, fraud, and travel alerts
The methods for transferring funds using the app must include direct deposit, remote deposit capture, ATM, ACH, merchant-based deposits, debit, one-time or recurring e-payments, and electronically generated paper checks to pay for products and services that do not accept electronic payments.
Data Reporting
Pilot implementers will provide reports to FSA containing aggregate data for FSA to monitor compliance and evaluate the success of the program. Pilot implementers will not share customer-level data with FSA, and vice versa. Reporting to FSA will include aggregated usage and complaints, a copy of the quality assurance program and related reports, call center activity reports, and complaint management reports for dispute requests, chargebacks, and fraud. Aggregated spending reports categorized by merchant type will also be required.
Proposed Timeline
ED has set a deadline for November 30. The final selection is scheduled for December 5 and the pilot is intended to go live within 60 days of signing the cooperative agreement. FSA plans to conclude the pilot in December 2020.
