Education News

The Business of Student Financial Aid: Students Complain They Lose Money To Fees

Many students around the country use loans and other financial aid to help pay for college. Increasingly, colleges are not sending the money directly to students. Instead, they're outsourcing that job to companies that transfer the funds to students.


To embed this piece of audio in your site, please use this code:

<iframe src="" style="height: 115px; width: 100%;"></iframe>

Students are buying books at the campus store at the University of Houston.

“Just this for today”

College junior Johnny Peña is working the register.

He always asks students — debit or credit?

If their answer is debit, it could cost them. Each debit transaction can cost 50 cents if a student is paying with financial aid money.

That money often comes on a preloaded card — a card from the company Higher One.

Peña tries to warn students.

“Because I had it before and they kind of charged me a lot and I didn’t notice until last minute. And I’m like, ‘Oh no, where’d my money go?’ Like taking 50 cents every time. I’m, like, uh. It was killer.”

Students at the University of Houston have been getting their financial aid this way for years. UH became Higher One’s first college customer in 2001.

Higher One also contracts with Houston Community College, Lone Star College and Texas Tech.

While the company makes money and the public universities can save money, many students say they lose money.

“When I went to make a first purchase, I think I was at the bookstore“

That’s Cedric Bandoh. He’s now a senior at U of H.

Cedric Bandoh
Cedric Bandoh is the student body president at the University of Houston. He has been campaigning for better financial aid services for students and has been working with the UH administration as they evaluate proposals for a new contract for financial aid disbursement. He says he’s been dinged by fees on his financial aid money. Like the majority of students at UH, Bandoh uses financial aid to pay for college.

“Later on, when I got around to checking my statement online and I saw some of these fees for using the card as a debit card and I said to myself, ‘Why am I being charged to use my own money?’”

The charges aren’t just for books. Use another bank’s ATM? That costs $2.50. Use an international ATM? That costs $5.

Like most students at UH, Bandoh needs financial aid to pay for college. His parents are from Ghana. His mom works at a grocery store. His dad is recovering from an illness.

Bandoh is a business major. He says he knows a business needs to make money.

“But it’s more about the principal that counts in this situation. This is financial aid money. This is the money we’re investing in our future. I don’t think that it should be nickel and dimed, even if it’s 50 cents. I just don’t think it is right.

He decided to bring the issue up at student government where he’s the president.

Student leaders had a “no confidence” vote last year in the card company Higher One.

Now the contract is up for renewal. The university’s asked for proposals.

Bandoh helped review those bids. He wants students to have easy access to their financial aid.

“It really isn’t rocket science when it comes to this. To me, it’s pretty simple — no hidden fees, no hidden gimmicks, just be clear, upfront.”

A spokeswoman for Higher One, Shoba Lemoine, says the company is straight forward with students. It has already eliminated some fees.

At UH, the vice president of finance Carl Carlucci says the university can’t offer banking services for free. That’s why they contract it out.

Carlucci admits it’s not a “great solution” and that some firms may have taken advantage of students. Going forward, he says UH will encourage students to bring their own bank to campus.

Still, others say students need more protection.

Chris Lindstrom is with the US Public Interest Research Groups.

She says low income and first generation students are especially vulnerable.

“In the absence of strong rules or laws in terms of student banking, student governments are really the only lines of defense for student consumers across the country right now.”

Another solution is students can request their financial aid the old fashioned way — with a check. Or they can have the funds deposited at their own bank.

Additional answers provided by University of Houston:



To read part one in this series, visit The Business Of Student Financial Aid: Feds Zero In On Abusive Practices.

Subscribe to Today in Houston

Fill out the form below to subscribe our new daily editorial newsletter from the HPM Newsroom.

* required