College Students: Your School Is Pimping You Out to a Bank

Why are banks so enthusiastic about marketing their products to college students? Because college students, like most young people, don't know shit about shit. But unlike most kids, they have some money (even if they borrowed it). That means they are easy marks, and lucrative ones. A college student might think: "My school will protect my financial interests." See? I told you they were easy marks.

A new report from the U.S. PIRG very clearly points out how many of our nation's largest and most respected universities are screwing their own students (further) by outsourcing basic financial operations to private banks. That means, quite simply, that instead of handling a fundamental element of its operations itself, the school essentially sells the right to exploit a captive audience—its students—to a third party, for a hefty sum. I cannot think of any circumstances under which this would ever benefit students financially.

Banks and other financial firms are taking advantage of a variety of opportunities to form partnerships with colleges and universities to produce campus student ID cards and to offer student aid disbursements on debit or prepaid cards. In addition to on-campus services, such as student ID functions offered on the card, some cards offer traditional debit card services linked to bank accounts; other cards provide additional reloadable prepaid card functions. The disbursement of financial aid and university refunds is the most significant partnership identified.

Yes: universities are tying student IDs to debit cards and even financial aid, and allowing banks to purchase the exclusive rights to "serve" students in these ways. By "serve" I mean "exploit." Because as any first-year business student knows, no bank will pay millions of dollars ("A new contract between Ohio State University and Huntington Bank includes $25 million in payments to the school over 15 years," for example) to obtain these rights unless they know that they will make more millions of dollars back. And they way they make those millions is by enticing unsophisticated young people into signing up for bank accounts with unnecessary fees ("including a variety of per-swipe fees, inactivity fees, overdraft fees, ATM fees and fees to reload prepaid cards"), and by marketing an entire universe of other financial products to them. This is the financial version of colleges selling Marlboro the exclusive rights to get students addicted to cigarettes. But potentially more expensive.

You, as a student, may say to yourself, "Hey, isn't the disbursement and administration of student funds a basic function of a school? Isn't it unethical for a university to outsource this merely to reap some short term cash, at the expense of the long-term financial health of its students? Particularly in a time of unprecedented and unsustainable student debt?" The answers are yes, yes, and yes. Talk to your school. (Or, preferably, yell at them.)

[US PIRG via NYT. Image via]