Skip to main content

Search form

New Department of Education Proposed Rule Will Protect Student Loan Funds by Stopping Banks and College from Teaming Up Against Students

Friday, May 15, 2015

The Department of Education announced today it would issue a strong proposed Cash Management rule. The rule would regulate the way colleges can enter into marketing agreements with banks and prepaid card issuers who wish to market to their student populations. It would ban overdraft and point-of-sale fees on some accounts - and require that all accounts be in the "best interests" of students.

Center for Responsible Lending senior policy counsel Maura Dundon offers remarks on the Department's proposed rule:

The Department of Education should be commended for its strong proposed Cash Management rule. Colleges are responsible under federal law for disbursing federal student aid funds to students. They must use the disbursement system to get money safely and swiftly to students – not as an opportunity to gain side profit by marketing students to banks. They must also be prohibited from using other marketing opportunities, like issuing student ID cards, as a bank marketing channel.

The exclusive bank-college marketing deals that the Cash Management rule addresses employ a variety of unfair tactics to induce students to deposit their student loan funds in high-fee accounts. But colleges should be looking out for their students' best interests, not helping banks skim off their student loan funds with bank fees. These deals also deter students from shopping around for accounts with better terms and lower fees.

We are especially pleased that the Department plans to ban overdraft fees on some campus bank accounts. Overdraft fees are some of the riskiest and most harmful bank fees; our research shows that 25% of students subject to these bank-college deals would face over $250 in overdraft fees a year. Some students would have over $700 in overdraft fees – more than the average cost of textbooks per year. This money should be going to support higher education, not to support banks.

Colleges have a responsibility to ensure the safety of their students – and this should include financial safety as well. The proposed Cash Management rule would help restore college's proper role in educating students to become informed citizens, instead of taking advantage of their student loan funds.

The Center for Responsible Lending's research on campus account overdraft can be found here:

For more information, contact Catherine An at 202-349-1878 or