Student debit card arrangements were at the forefront during the first meeting of a negotiated rulemaking committee convened by the Department of Education to review its cash management regulations, state authorization for distance education and foreign campuses of domestic institutions, and several other topics. Earlier, the Governmental Accountability Office (GAO) had released a detailed report on college debit cards, and the Consumer Financial Protection Bureau (CFPB) had weighed in with a blog post calling attention to relationships between financial institutions and colleges and universities.
ED convened its newly appointed Program Integrity and Improvement negotiated rulemaking panel for three days of meetings last week. The 15 committee members—including business officers and bursars—along with an equal number of alternates, plan to meet again in late March to review draft regulatory language and for a final time in April. The group’s goal is to reach consensus on draft regulations for each of the six areas on the agenda. ED has posted the committee roster, agenda, and issue papers on its website.
The committee’s agenda includes the following issues.
- State authorization of distance education. An earlier rule requiring institutions offering distance education to obtain authorization from each state that mandates it in order for students from those states to be eligible for Title IV funds was vacated by the courts due to procedural issues. By including the topic in this negotiated rulemaking effort, ED is following proper procedures. Much of the panel’s conversation focused on the State Authorization Reciprocity Agreement, an effort to develop a rational process for coping with varying state requirements.
- State authorization of foreign locations of domestic institutions. On the first day the panel convened, the ED representative noted that current requirements for state authorization do not specifically address foreign locations or campuses run by domestic institutions. No specific problems or issues were highlighted. Committee members discussed current arrangements, foreign licensure to operate abroad, and how student complaints are handled.
- Cash management. ED focuses largely on rules governing credit balance disbursement, but Department officials also promised to update the cash management regulations to remove outdated references. During the rulemaking discussion, NACUBO representatives and other members of the committee defended the current 14-day time limit for disbursing Title IV credit balances, explaining that institutions use that time to ensure student eligibility and the accuracy of the amounts.
Most of the discussion on these issues centered on relationships between banks and institutions (including those not tied to student aid), use of third-party servicers and various types of debit card arrangements to disburse aid to students, transparency about such arrangements, ensuring student choice, and ATM access.
The agenda also includes clock-to-credit-hour conversions (which do not generally impact NACUBO members), the ability of students to get aid for retaking classes, and credit standards for parent PLUS loan borrowers.
NACUBO members on the committee include Gloria Kobus, director of student accounts and receivables at Youngstown State University, Joan Piscitello, treasurer at Iowa State University, and Joe Weglarz, executive director of student financial services at Marist College.
A week before the ED negotiations began, GAO issued a report in response to a request from Senator Tom Harkin, chair of the Committee on Health, Education, Labor, and Pensions. The report (GAO-14-91)—College Debit Cards: Actions Needed to Address ATM Access, Student Choice, and Transparency—found that 852 institutions have an agreement to provide some type of college debit card to students. They included both institutions with arrangements related to disbursement of credit balance refunds and those having agreements with financial institutions that are unrelated to student aid but involve offering bank accounts to students. Closed-loop campus cards were not included. Most of the agreements involved public institutions.
Significantly, the report found, “Most of the college card fees we reviewed generally were not higher, or in some cases, were lower, than those associated with a selection of basic or student checking accounts at national banks.” The researchers noted, however, that the schools they reviewed did not track the average yearly costs actually incurred by their students to use the card products.
NACUBO provided information to GAO in preparation for the report. The association’s recommendations, Safeguarding Student Finances, and data collected in a 2012 survey are cited several times.
GAO expressed concerns that ED regulations requiring institutions to offer debit cards as a way to disburse credit balances must ensure convenient access to ATMs or bank branches on or near campus are not clearly defined. The report also recommends that ED, in consultation with the CFPB, develop requirements that schools and their third-party servicers provide “objective and neutral information on their options for receiving federal student aid payments.”
CFPB Weighs In
On February 12, Rohit Chopra, CFPB’s assistant director and student loan ombudsman, blogged about relationships between financial institutions and colleges and universities. In “What Sunshine for Student Financial Products Can Show Us,” Chopra highlighted agreements that relate to a financial partner’s use of the school logo, payments to institutions for student accounts, and discounted prices in exchange for marketing access. CFPB has previously called for financial institutions to voluntarily disclose their arrangements with schools. NACUBO responded to a CFPB request for information in 2013 on this topic, and NACUBO’s Anne Gross, vice president, regulatory affairs, represented the association at a forum on “Banking on Campus” in September.
The panel will reconvene March 26-28 and plans to complete negotiations on the rulemaking effort on April 25.
If the panel comes to consensus, the Department will use the agreed-upon language to issue a notice of proposed rulemaking. If no consensus is reached, ED is not bound by tentative agreements reached at the negotiating table and is free to propose regulations as it wishes.