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Feds Ban Student Account Overdraft Fees

Trades express concern for how new regs, which are intended to protect student consumers, may affect credit unions.

By Peter Strozniak | Updated on October 28, 2015

The U.S. Department of Education announced new regulations Tuesday banning overdraft and transaction swipe fees on student debit and prepaid card accounts. The rules also prohibit schools from requiring students to open an account with a specific institution in order to receive student aid funds.

According to the DOE, the regulations were part of the Obama Administration’s goal to protect students in the rapidly expanding college debit and prepaid card marketplace. The regulations also add a new income-based repayment plan so more borrowers can limit the amount of their payments to 10% of their income. The federal agency also said the rules address troubling trends in the proliferation of campus debit and prepaid cards offered to students in exchange for monetary benefits to colleges and universities.

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Peter Strozniak

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