The Department of Education yesterday finalized a rule that would limit the kinds of arrangements colleges can make with banks that disburse funds to students from federally guaranteed student loans. The final rule imposes significant restrictions on bank accounts that are offered to students under an arrangement between the bank and college or university — accounts that are low-cost or free and are often tailored to students’ needs. The rule applies whether or not the student receives student aid.
Although the final rule reflects some changes that respond to ABA’s comments — such as removing parents’ accounts from being subject to the rule and limiting the scope of its definition of institutions that process federal aid funds to exclude treasury management services — the rule retains many of the problematic provisions of the proposed rules.
“Students benefit from the low-cost and convenient financial products made available through arrangements between educational and financial institutions,” said ABA President and CEO Frank Keating. “The rule imposes a new and burdensome layer of regulatory complexity and uncertainty that may drive financial institutions to abandon the student bank account market, reducing competition, availability and choice for students.” In addition to arguing that the rule counteracts DoE’s stated goal of protecting students, ABA has argued that the department lacks legal authority to become a de facto bank regulator. For more information, contact ABA’s Nessa Feddis.