The Department of Education today published a proposed rule that would limit the kinds of arrangements colleges can make with banks that disburse funds to students from federally guaranteed student loans.
The proposed rule would prevent colleges from requiring students to open an account with a specific financial institution in order to receive loan disbursement or implying that an account at a preferred institution is required. Instead, colleges would be required to provide a “neutral” list of account options through which they can receive disbursements.
Meanwhile, the rule would bar banks from prioritizing student loan disbursements to their own accounts instead of students’ preexisting accounts. It would also prohibit financial institutions from assessing overdraft fees on any college-endorsed account and require them to have “reasonable access” without surcharges to ATMs in which to access their loan funds.
“Students receive clear information and have a choice in what bank account to use,” said ABA SVP Nessa Feddis. “Independent studies have found that students do better and pay less with campus bank accounts than those found off campus. We will carefully review the proposal and look forward to participating in the comment period.” Comments are due by July 2.