Lawsuit raises questions about PSU’s relationship with Higher One

An April lawsuit filed by students at California’s Ventura College against Higher One calls into question the vendor’s policies and procedures associated with college student accounts, including those at Portland State.

According to the class action complaint filed on April 18, Higher One is accused of preying on “unsuspecting college students, luring those college students into using Higher One banking accounts, then subsequently assessing and collecting deceptive and improperly disclosed bank fees.”

The suit claims that the act of placing student funds into a Higher One account and then issuing debit cards for the account before ever soliciting or activating the card is illegal. It also claims the practice is in violation of the California Consumers Legal Remedies Act and the Electronic Fund Transfer Act.

Higher One is the same provider used by PSU to handle financial aid disbursements, but contracts vary by institution. PSU’s contracts with Higher One have been reevaluated over the years based on concerns similar to those voiced in the Ventura College suit, including the convenience fee structure. In activating their Higher One accounts, Ventura students claimed that the information regarding convenience fees was less than clear about what a student could potentially pay, including 50-cent debit PIN fees, $25 fees to transfer funds to a different account and $4.50 charges for using non-Higher One affiliated ATMs.

PSU initially contracted with Higher One in 2004. According to PSU Director of Communications Scott Gallagher, students wanted a way to access their financial aid money as quickly as possible. A deal with Higher One circumvented students having to pick up paper checks at the registrar’s office, and then having to wait for the check to clear their personal bank account. Additionally, it offered a simple option for international students who don’t already have other bank accounts in the U.S.

“It took a lot of staff time to do checks and disbursement. It was expensive and inefficient, from the university perspective, to do it the old way, and it used a heck of a lot of paper,” Gallagher said.

One of the most crucial differences, Gallagher said, is that at PSU, student funds are not automatically placed into a Higher One account. Students have various options for receiving financial aid, and are encouraged to transfer funds to existing accounts if they do not want to use the Higher One account. Another important distinction is that there is no fee to initially put financial aid funds into a student’s existing account.

Gallagher also pointed out there are indirect benefits that come with Higher One. “Students are indirectly affected by the fact that PSU is saving $400,000 to $500,000 a year on transactions and staffing by utilizing this outside service,” Gallagher said. “That indirectly affects their tuition. As the state continues to disinvest in the university, we are constantly more responsible for covering more and more operating costs, so anything we can do to be more efficient and reduce our costs, we are trying to do—but reducing our costs while providing the same or better services to our students,” he added.

Since 2004, PSU has renewed its contract, but with considerable revisions. The initial deal in 2004 spurred walkouts by more than 2,000 students. Additionally, the Associated Students of Portland State University led a boycott due to the lack of student involvement in the decision. Students were frustrated with the privatization of the handling of financial aid and features of the services, such as 50-cent fees on all PIN-based debit transactions.

In 2009, PSU solicited student input about Higher One through online surveys. Higher One was rated against other possible providers such as U.S. Bank, Sallie Mae and Wells Fargo. Higher One fared better than any other option in the opinion polls, but students still voiced many concerns.

Given the feedback and complaints about the existing conditions of the Higher One contract, PSU made significant revisions before renewing it for another five years. The 2009 contract eliminated the PIN-based debit fee, set ATM fees at $2.50 and provided an online bill pay option. However, according to ASPSU, though changes were made based on student polling, there was no direct student participation—including the absence of an ASPSU member in deciding the features of the contract.

“ASPSU has a long history of having issues with Higher One,” said ASPSU Communications Director Anthony Stine. “In the future, when the Higher One contract is up for renewal, ASPSU will be more involved in the process than it was in the past. We know that students have a wide variety of opinions about Higher One, and we would bring those directly to the university administration,” Stine said.

Regarding concerns with the current Higher One contract and the practices in place, ASPSU President Adam Rahmlow outlined the most troubling aspects and what action ASPSU plans to take: “Service to students has been exceptionally poor, being based in Connecticut, our students have limited options for interacting with the provider—ATMs are frequently broken, out of service or out of cash,” Rahmlow wrote in an email. “And furthermore, money that students hold in the bank is not readily reinvested in our community, e.g., a credit union that operates within the city, state or region at least would be preferable to a corporate bank investing in, essentially, their own technology,” Rahmlow added.

In the meantime, Rahmlow pointed out that ASPSU has been involved in efforts to make financial logistics easier for students, such as providing input on where and if Chase Bank ATMs would be located on campus.

As Higher One’s contract with PSU comes up for renewal next year, it will provide an opportunity for ASPSU and the student body at large to evaluate the current services, as has been done in the past.