Card, mobile credential, payment and security
The Department of Education released an initial draft of proposed changes to the Cash Management portion of the regulation governing title IV financial aid funds. The document includes a series of provisions that would dramatically impact the ways campuses could distribute funds to recipients, so much so, that in essence it would effectively outlaw some common card-based solutions.
At this stage, it’s imperative for every campus to closely examine the draft and determine how it could impact current processes. Moreover, any concerns should be shared with the Department of Education and the committee developing the proposed regs.
The time to have impact on the process is short, as the committee has an aggressive timeline, but voicing your opinion is invaluable to the process nonetheless. The next review meeting began March 26 and will continue through March 28. Though this was anticipated to be the final meeting of the negotiating committee, rumor is that one more meeting will be held in the coming weeks. Comments can be directed to the U.S. Department of Education’s lead negotiator for the project, Pamela Moran, at [email protected]
The most significant changes are focused in section 668.163 Maintaining and Accounting for Funds. Specifically, part (e.) Sponsored account, contains a number of new requirements that would make it difficult or impossible to continue current practices.
New provisions would make it far more challenging to distribute to students debit or prepaid cards – or add this functionality to ID cards.
No more cards that bear the campus logo or mascot or otherwise imply affiliation with the campus
Must disclose the contract between campus and servicer in its entirety online
Must obtain written consent to open the account and then must also obtain separate consent to provide a debit or prepaid card associated with the account
Campus may not provide information to the servicer any information about the student until the student has provided consent
While the initial two items may be a less-than-desirable restriction, the latter two items are business altering.
Currently, many campuses outsource the consent process to the service provider, letting the external entity collect the students’ preferred distribution methods. The proposed changes would shut this ability down, as consent would have to be received by the campus prior to sharing student information with the servicer. While this may seem like a subtle change, in reality it would force many campuses to completely redefine processes, staffing and even facilities.
In essence, the value of third-party servicers would be gutted. No longer could a campus outsource its aid distribution efforts to these providers. These providers would be reduced to just another one in the series of options for an account a student could choose to receive funds. And campuses that rely on them would instead have to bring these functions back in house.
In terms of fees and costs, new provisions would eliminate all fees associated with accounts. Specifically, fees are prohibited when opening the account, receiving the debit or prepaid card, maintaining the account and using the card at “any” ATM.
This prohibition on fees for maintaining the account specifically impacts Higher One’s enhanced account option.
The ATM fee prohibition, meanwhile, impacts all providers. Most provide a certain number of free withdrawals but this would seemingly force unlimited free transactions, even it seems long after all title IV funds had been exhausted from the account. The current language is also vague on whether the provider is expected to somehow cover the fee charged by the ATM owner when the student opts to use a foreign – non provider-owned – machine.
It is also unclear if these changes will trickle down to cover campus card bank partnerships that do not specifically include financial aid distribution services.
The time is now to impact the regulatory process. Stand up for your industry and voice your opinion.
