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Higher One: The Next College Campus Rip-Off?

The era of credit card issuers luring college students to sign up for their plastic by offering them free Close up of MasterCard logot-shirts and food is over. Or is it?

Many college campuses have gotten cozy with Higher One, an ambitious company that critics say has adopted the same type of dubious business practices that landed credit card issuers into so much trouble.

About 1.2 million students now possess Higher One cards with a MasterCard logo that bears the name of their college. Despite the MasterCard logo, these cards are not credits cards. The Higher One cards allow students to tap into their financial aid money to make purchases for anything they want from textbooks to six-packs.

Many students take out students loans in excess of tuition and room and board to pay for such things as textbooks and living expenses. Colleges have routinely issued checks to the students for the excess amounts. Now students at many campuses are being told to access their money through these Higher One cards.

Outrageous Debit Card Fees

Unfortunately, the fees that Higher One charges are not competitive. Students must pay 50 cents to use a PIN when making a purchase. Students can also get hit with a monthly $19 inactivity penalty. What's more, it also costs $2.50 to use another bank's ATM.

Higher Ed has teamed up with colleges to make Higher One's loan card the de facto debit card on their campuses, according to a Washington Post article. In fact, at some schools, including Portland State University, the debit cards serve as campus IDs and every student has one. Here's where you can find colleges and universities that offer Higher One cards.

Watch Out For Conflicts of Interest

So what is my reaction to Higher One's invasion on college campuses?

The company's success proves once again that you can't assume that colleges are going to look out for their students' best interests. It wasn't long ago that colleges were recommending outside student loan lenders that just happened to be giving the schools hidden financial rewards. And until a federal law went into effect recently, colleges were inviting credit card companies to their campuses in return for financial goodies.

Bottom Line

Let me state the obvious: I'd stay away from any financial firm bearing credit or debit cards that charges outrageous fees. And that includes Higher One.

I'd also urge students to only borrow what they really need to pay the bills. Rather than over borrow, get a campus job and use that to pay for your textbooks and Saturday night dates. Do that and you're more likely to stay out of financial trouble.

Higher One image by Qiao-Da-Ye. CC 2.0.

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