ED Issues Guidance on Bank Fee Reporting
9/16/2016
On September 7, the Department of Education published a "Dear Colleague Letter" issuing guidance on cost disclosure requirements for institutions with Tier 1 (T1) and Tier 2 (T2) arrangements. Institutions with these arrangements will be required to comply with the regulation by September 1, 2017.
The department defines T1 arrangements as those between an institution and a third-party servicer where the servicer "performs one or more of the functions associated with processing direct payments of Title IV funds on behalf of the institution" and offers one or more financial accounts under the arrangement, or markets an account to students itself or through another entity.
T2 arrangements are defined as those between an institution and a bank under which accounts are offered and marketed directly to students. ED has added new thresholds for determining which parts of the regulations apply, depending on the number of students at the institution who receive Title IV credit balance refunds.
Institutions with these arrangements will need to publicly post on their websites information on the number of student accountholders and the costs they incur, as well as the total consideration paid or received by the parties under the arrangements.
Identifying which students hold these accounts will be easier for institutions with T1 arrangements, as the servicer will have the enrollment data necessary to determine which students are using the accounts. This becomes more difficult for institutions with T2 arrangements. ED recommends using one or more of the following approaches to comply with the reporting requirements.
Institutions must document the process used and show at ED's request that the cost information was calculated in a reasonable and reliable manner.
Directory Information
The first approach ED suggests is for institutions to designate students' first and last names, birth dates, and dates of attendance as "directory information" in the public notice it provides to students under Family Educational Rights and Privacy Act (FERPA) regulations. The account provider can then attempt to match this information to its own information on the accounts. A student may opt out of the disclosure of this information, and those students would not be included in the cost disclosures.
Accounts Linked to Student IDs
To utilize this approach, a student will need to contact the account provider under a T2 arrangement to link an ID to his or her account. The account provider would then be able to identify those accounts. ED recognizes that not all students will elect to link their student IDs to accounts under these arrangements but believes that disclosing costs tied to linked IDs will provide useful information to students.
Revenue Sharing
In a revenue sharing agreement, an institution may be compensated by the account provider based on the number of students who open a financial account under a T2 arrangement. The account provider should then be able to identify accounts opened by students.
More Resources
NACUBO has a webpage with extensive cash management resources for institutions.
