Soaring student loan debt is mostly measured in outstanding balances, but there are companies aligned with the nation’s public universities that charge student additional fees for accessing financial aid refunds via debit cards.
These companies manage financial aid disbursements, including Higher One, which reported a net income of $32 million in 2011, a 27 percent jump from a year earlier.
Sherry McFall, a student at Ventura College in California, claims Higher One automatically creates bank accounts for unsuspecting college students, according to a class action lawsuit she recently filed.
“Many students pay Higher One unconscionable bank fees with borrowed money, often at 7 percent interest or higher,” the lawsuit states.
In 2010, Higher One took in at least $66 million on so-called “convenience fees” charged to students, the suit said.
Higher One has arrangements with hundreds of colleges, including Ventura College, in which a student’s grant, scholarship and or loan money is automatically deposited into a Higher One bank account “without the authorization or consent of students,” McFall contends.
Colleges and universities, including Ventura College, then send student mailing address and email address information to Higher One without receiving consent, according to the suit.
Higher One uses this information to begin sending marketing mail and email to students, encouraging them to use Higher One banking services for their financial aid refunds, which are a student’s financial aid money (whether from grants, scholarships or loans) left over after the school deducts its tuition and fees, according to the suit.
Shoba Lemoine, spokesperson for Higher One, told The Huffington Post that the company’s debit card is optional and activated only if students select that method for receiving a refund.
“If Higher One has been hired by the school to handle the disbursements as a whole, then yes, the student has to work with Higher One to tell us how they would like to receive their refund, no matter what method they choose,” Lemoine told The Huffington Post.