Everyone – students, families, Democrats, Republicans, Representatives, Senators, the President, even universities and colleges themselves – agree that higher education is too expensive. Both the legislative and executive branches have pledged to implement policies that lower those costs. Last Thursday, theBiden-Harris Administration announced their plans to help in this area with strategies to “crack down on junk fees.” These junk fees include non-refunded meal account funds, bank fees associated with using a college-sponsored credit card or banking account, automatic charges for textbooks and supplies included in tuition, and finance charges for taking out a student loan.
Colleges and
universities often partner with banks for disbursement of financial aid through
credit or debit cards. Unfortunately,
many of these bank cards include excessive and/or hidden fees that can cost
students significantly. Problems with
these fees have recently been reported to Congress by the Consumer Financial Protection Bureau (CFPB) and were reported by the Government Accountability Office (GAO) as far back as 2014.
Another, often
hidden, fee students and parents incur is the loan origination fee. This administrative fee can be from 1 to 4
percent of the amount of the loan and is frequently added to the loan amount
and, therefore, continuously incurs interest throughout the life of the
loan. According to the Biden-Harris
Administration “These fees are a relic of an era when the government
compensated private lenders to issue these loans. Today, this fee is
nothing more than a tax imposed on students by the government, costing
consumers more
than $1 billion annually.”
Colleges and universities are not on board with all the
Administration’s plans, however. For
instance, universities would now be required to return all unused “flex dollars”
in the students’ meal plan accounts.
Moreover, students would have to opt-in to include textbook fees into
their tuition charges. The
Administration and the Department of Education say this will allow students to
be aware of what prices they pay for textbooks and allow them to find cheaper
sources for materials. Universities contend that this will impede their ability to provide students with materials
at below market prices on the first day of class.
These announced strategies build upon regulations released in late 2023 which include investing
in the Open Textbooks Pilot Program to lower textbook costs, requiring
universities to adhere to more stringent requirements of transparency on all
college costs, requiring universities when they act as lenders to adhere to federal consumer financial protection
laws, and preventing colleges from withholding transcripts of courses
paid for with federal money.
