Washington State House Democrats


Washington state passes bill protecting students from fees gouging financial aid

Contrasts with Trump/DeVos’ U.S. Dept. of Education Allowing Companies to Charge Students

Washington State has a new law to ensure that college students do not lose part of their financial aid to fees charged by prepaid debit card companies. HB 1499 was passed unanimously by both chambers of the Washington Legislature and signed by Governor Inslee on March 9. “When students receive their financial aid, they should receive one hundred per cent of their financial aid,” said prime sponsor Representative Gerry Pollet (D-Seattle, 46th District), who is Vice Chair of the House Higher Education Committee. “Private companies who disburse student aid on prepaid cards should not get to profit from fees taken from state aid. That aid should go to the student, who truly needs it.”

“In sharp contrast to the U.S Department of Education’s recent pandering to student loan servicers and private companies angling to harvest student data, Washington state sets a standard of doing business to serve the ‘best financial interest of students,’” Pollet said.

The federal pilot program, instead of disbursing financial aid funds to a student via direct deposit or check, the new financial aid card vendors would get the benefits of having the funds above tuition held by them on deposit until withdrawn, and the opportunity to cross-market or sell data (with permission). The federal Education Department notice to prospective card vendors touts the economic opportunity to be the first card provider for students:

“Please note that this will, in all likelihood, be the first financial services product introduced to a student which could then lead to a long-term, even life-long, relationship for other financial services and products.” (Federal Student Aid Next Gen Payment Card Program Pilot , draft Solicitation, at 10, January 19, 2018).

Multiple class-action lawsuits, investigation by the Consumer Financial Protection Bureau, the U.S. Government Accountability Office (GAO), and research by U.S. PIRG, and more, demonstrated that students needed federal protection when they received aid on prepaid debit cards. Protections were approved at the federal level in 2016 but none at the state level until the passage of HB 1499.

HB 1499 sets the best financial interest of the student as the standard in Washington State based on the findings of the GAO:

GAO found instances in which schools or card providers appeared to encourage students to enroll in a college card rather than present neutral information about payment options. The financial marketplace functions best when consumers are fully informed and have unbiased information. However, schools may have incentives to influence student choice because some receive payments from card providers based on the number of card accounts or transactions, leading some consumer advocates to question whether schools always act in their students’ best interests. Furthermore, the contracts between schools and card providers are not publicly available and data on these cards are limited, in contrast to another college-related product—affinity credit cards bearing the institution’s name or logo—for which key information must be disclosed. Increased transparency for college card agreements could help ensure that the terms are fair and reasonable for students and the agreements are free from conflicts of interest.

The bill sponsored by Pollet mirrors the pre-DeVos regulations set forth that applied only to federal financial aid until now:

  • Students cannot be forced to use a prepaid debit card to access their financial aid, they must receive all choices in a neutral manner
  • Students must have access to ATMs that don’t charge fees to access their aid
  • Higher education institutions must evaluate the contracts of third-party servicers of financial aid to reflect the best financial interests of students

To empower students on Washington campuses, HB 1499 goes further to ensure that students can view the terms of any agreement for their prepaid debit card on their school’s website, including the contract the company has with their school. Students must receive notice of their consumer rights, and how to begin a complaint process if they are unable to access funds. The Washington Student Achievement Council will review unsolved complaints.

“For students heading to college, figuring out how to handle their aid money is a major source of stress,” said Kaitlyn Vitez, higher education advocate for U.S. PIRG. “The Fairness in Student Financial Aid Disbursement Act” makes paying for college expenses a more fair and transparent experience for students. Cutting unnecessary fees, ending revenue-sharing agreements, and sharing more information about how to access your aid money are measures we’re very glad to see. We thank Rep. Pollet and the other sponsors for their advocacy to defend students in the financial marketplace.”

Rep. Pollet thanked the work of the Washington Student Association, U.S. PIRG, and WashPIRG for their tireless advocacy to ensure that students were centered in policy decisions regarding their rights as consumers.