Student Loan Debit Cards

Q: A few of my friends who attend a different college than me have something called “student loan debit cards.” How are these student loan debit cards different from student loans, and what are they used for?

A: Student loan debit cards are something that have started to appear across college campuses more recently. The student loan debit card is not a credit card, but rather a debit card issued by a contracted financial aid services company (such as HigherOne), which allows students to access money from their college loans at campus locations and ATM’s.

Each student loan debit card will have it’s own terms, but generally the way they work is that they remove the school from the equation of distributing the difference (in check form) of any extra financial aid the student has after tuition (aka: the money used for books and other related expenses). Instead, the financial aid services company contracted with the college, will set up accounts for students where the student loan money is deposited. Students must then activate this student loan debit card to gain access to their student loan money left over after tuition.

There has been some controversy and backlash over these student loan debit cards by the student body at many colleges implementing this system. Some students are frustrated by their lack of choice to opt into a student loan debit card (as some colleges require them) and the fees associated with the cards. Some of the fees and charges associate with student loan debit cards include: an inactivity fee, a fee for using a PIN to make a purchase rather than a signature, a fee for using another banks ATM, and a card replacement fee.