Portland State’s Higher One contract won’t be up for renewal until October 2014, but renewal discussions will start this January.
You may recognize Higher One as the company behind the debit and identity cards issued to all students, and used in the optional free checking account for financial aid disbursals. Higher One is a national third-party financial aid distributor providing service to 830 schools and 6.2 million students.
Portland State’s Higher One contract won’t be up for renewal until October 2014, but renewal discussions will start this January.
You may recognize Higher One as the company behind the debit and identity cards issued to all students, and used in the optional free checking account for financial aid disbursals. Higher One is a national third-party financial aid distributor providing service to 830 schools and 6.2 million students.
They’ve also been in the news recently: They were ordered last month to pay back $11 million in illegal fees to 60,000 account holders, according to a Federal Deposit Insurance Corporation press release.
At PSU, the company has been scrutinized since they began distributing financial aid in 2004. In 2009, after student protests, PSU was able to get the company to eliminate 50-cent transaction fees for all debit purchases.
Students will again have opportunities to share their feelings about the company and its services during the renewal process next year, said Sandra Burris, executive director of PSU Finance and
Administration.
A feedback process for renegotiation will involve student focus groups and student government input, and perhaps a survey of the entire student body. Burris made it clear that the students will know when it comes time for contract renewal.
“We’re still 18 months out,” Burris said. “But we really want to make sure it’s the right thing.”
Digging into the latest Higher One headlines
An Aug. 11 FDIC ruling determined that Higher One had been illegally charging students multiple non-sufficient fund fees per overdraft, as well as timing the fees in a way that encouraged accounts to be continuously overdrawn and cause fees to keep accruing.
The restitution was ordered from 2008 “to such time as Higher One ceased charging the fees in question,” according to an FDIC press release.
Shoba Lemoine, spokesperson for Higher One, said the student population at PSU shouldn’t be expecting to see any credits, since they already disbursed them to account holders long ago.
“We’re a service reviewed by regulators,” Lemoine said. She explained that these special cases with refunds referred to less than 1 percent of delinquent accounts, and that PSU’s 2009 contract had eliminated deceptive fees.
Lemoine justified her company’s service, stating that electronic distribution is environmentally friendly, and that having a Higher One checking account saves students the time of standing in long lines for a check. It also eliminates a transfer delay of two to three days when students transfer aid to their own third-party bank accounts.
Criticism for ‘siphoning’U.S. Public Interest Research Group, a national nonprofit, is one of Higher One’s most vocal and well-organized critics. In a 40-page report titled The Campus Debit Card Trap, U.S. PIRG stated that 80 percent of the company’s revenue comes from fees charged to its checking account holders.
“Banks should be banned from siphoning,” said Rich Williams, author of the study.
Lemoine disputed the report’s claim. “That stat is wrong,” she said, explaining that just under 50 percent of Higher One’s revenue is derived from fees. “We’re a public company; you can go through our financials,” Lemoine said. “U.S. PIRG didn’t know how to read them.”
Williams responded that Higher One and similar companies operate in a very opaque manner, and that the figures are disputable from very technical standpoints. “Part of it is interchange fees,” he admitted, which are fees paid among banks to each other.
But Williams stressed that it was not the revenue percentages or the recent FDIC regulation that had his group so outraged.
“It’s the fact that they are finding new and innovative ways to market to college students,” he said. “I don’t know anyone who would really bank with HO out of free will.”
“If 70 to 80 percent of students are selecting Higher One, it is either because they’re the best, or they do it in predatory ways.”
Williams was outraged that Higher One forces a two to three day delay for direct deposit to third party banks, and two to three week delays for paper check disbursal. Students choose Higher One because it’s the quickest and easiest way to get their money, and that under the financial crunch of college they often need it as quickly as possible, he said.
Back at PSU, Burris is doubtful that a Higher One checking account is substantially worse than a third-party account. “I’d really have to see them lined up side by side,” she said.
PSU Director of Communications Scott Gallagher said in a previous interview with the Vanguard that the university is saving $400,000–500,000 per year by using the service, as well as making aid disbursal more convenient for students.
U.S. PIRG concluded in its report that debit programs can be a benefit to students if
structured properly. They recommended that administration negotiate deals that are more transparent, and that students “complain often and loudly to administration and off-campus watchdogs if they encounter a problem.”
Expect more reporting from the Vanguard as we move closer to the renegotiation process in January.
