Education News: Financial Student Aid To Test Debit Cards

Rising costs of higher education, student aid, and the government’s role in providing federal grants and loans for collegiate student tuition and books has come to the forefront of discussion with announcements of intended changes from the Federal Student Aid Department. The department announced a debit card pilot program, using federal debit cards as financial aid payment for loans and grants. The pilot program will include 100,000 students at four United States colleges. The department intends not only to distribute funds on debit cards, but also to restrict what students may purchase with debit cards.

Financial aid funds previously distributed to students paid student college tuition, and any excess funds were distributed to the student. Traditionally, student aid could be used for varied expenses, including rent and daycare for some. Students previously were not restricted on what items and services they could purchase. Previously, student allotments were distributed directly to colleges. The prepaid debit cards allow the education department to distribute money directly to students.

The pilot program is being introduced by Federal Student Aid Chief, A. Wayne Johnson. He cites enhanced customer service, assisting students in understanding their debt, and what they are spending their money on as reasons for the program. The program is part of a drive to streamline the department by Education Director Betsy Devos, and is a move away from financial aid’s more traditional role of distributing funds to colleges. FSA is also launching a mobile app, wherein students can monitor their spending, get spending notifications and account balances.

While cost savings, and student spending responsibility seems to be the aim of the debit cards, consumer advocacy groups are expressing concern about student privacy. They are concerned if private student information will be marketed to outside companies. They also cite facts that the FSA has solicited private companies to handle the prepaid debit cards. Such groups are concerned the financial aid department is now acting as a bank, which oversteps its duties. Regardless, the pilot program, and financial aid debit cards are expected to be distributed later this year. The FSA app, still in development, will also be launched later this year for student access.

February 15, 2018

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