Select Page

Prepaid Paves the College Way

Prepaid cards for college students seems like a commonsense thing. Prepaid cards enable students to access funds without the “danger” of overextending, as may be the case with credit cards. Also, the Credit CARD Act of 2009 limited ways that credit cards could be marketed and issued to college students, making prepaid cards a more viable option. Prepaid cards offer valuable budgeting lessons that can benefit young adults throughout their lives. It’s also a way for parents to help students cover college-related expenses without writing a blank check.

Universities have also tuned-in to the convenience factor, and use prepaid cards to extend federal student aid. Some research posits that roughly 9 million college students attend a school that partners with a bank to issue financial aid on prepaid cards.

Prepaid Rules Change

The use of prepaid cards by universities also posed some new challenges that caught the attention of the U.S. Department of Education, which reformed rules around prepaid cards targeting college students in 2015. The new regulations were meant to stop “unreasonable fees” and other “troubling practices” that plague the prepaid card sector.

Highlights of the changes include:

  • Students should be able to choose how federal financial aid is issued (including to a pre-existing bank account)

  • Students should get neutral information about financial aid disbursement options

  • Inactivity and point-of-sale swipe fees and other “excessive and confusing fees” must be eliminated

These rules require colleges and universities to rethink financial aid issuance, especially those that have relied on prepaid cards as the end-all-be-all for issuing financial aid.

CFPB Schools Issuers

Unrelated to the DOE’s regulations, the Consumer Financial Protection Bureau (CFPB) issued its own rules that recently went into effect on April 1, offering prepaid accounts important protections. These include:

  • The same protection from fraud, unauthorized charges and errors that debit cards enjoy. This covers all prepaid as well as mobile versions.

  • Uniform fee chart for consumers to compare prepaid cards and understand all fees

  • Warnings on non-FDIC insured prepaid accounts

  • No fees or charges on balance, transaction data, and other basic account information, except on monthly paper statements.

  • Requirements that employers using payroll cards must provide employees fee information and a choice on how they receive their pay.

  • Required compliance with credit card laws for hybrid prepaid-credit cards, including 30-day waiting period before overdraft features are added.  

  • Publically available fee schedules on the company’s website, which will also be listed online by the CFPB.

This information is important for universities and colleges to have on-hand, especially those that may issue prepaid cards for employees or students for any reason.

Future of Prepaid: From Class to Cloud

Colleges and financial institutions have made progress in streamlining payments for students across campus by combining forces. Many colleges have partnered with banks to combine campus IDs and network-branded debit cards, simplifying access and payments for all things college-related, both in-person and online.

This convergence has also moved to mobile in some cases, eliminating the need for students to carry any sort of plastic. Fintech firms have created mobile apps that function as both student IDs and prepaid cards for on-campus and off-campus purchases. These apps are a nod at the younger generations’ desire to access the entire world through a smartphone.  

Class in Session

Adhering to government regulations around prepaid cards can be complex. Ensuring you’re operating in alignment with ever-changing rules is easier with a payments partner that understands the prepaid space.

Arrow Payments can be your trusted partner. We can work with you to unify payments across all departments—from financial aid to dining services—to ensure your students have access to what they need.  Whether prepaid is on the menu or something you’d like to consider, we can help you select the best solutions and implement best-in-breed technologies to keep your operations running smoothly. Contact us today to learn how we can help you create a payments strategy around prepaid today.

Thought Leadership

Recent Insights

Check out the latest trends and reports from Arrow Payments.

How to Prep for PCI Compliance

How to Prep for PCI Compliance

Higher education faces a unique set of challenges when it comes to credit card security and PCI compliance. As compared to other businesses, higher education institutions operate with multiple units, departments, and campuses — each that accepts and processes a number...

What is EMV Compliance?

What is EMV Compliance?

Consumers want to make payments quickly, easily, and securely. For universities that accept payments across multiple departments — from bookstore payments to tuition payments — securing credit and debit card payments is not optional. Not only does it boost consumer...

Gain Visibility into Your Higher Education Payment Systems

Find out what’s happening in every department and start building solutions that address fundamental needs.

Start My Discovery