Who is Higher One?

If you do not know who Higher One is, you are probably new to higher education in the United States. Higher One Holdings Inc., a New Haven, Ct. company, distributes residual financial aid money to over 1.2 million students at 770 college campuses across the nation, including St. Petersburg College through a MasterCard debit card called the OneCard, which is connected to an online bank account that holds the student’s residual financial aid money. Student financial aid lenders distribute funds to schools who in turn deduct tuition, fees, and textbook costs. It is the schools responsibility to then distribute the funds to each student. Schools contract with Higher One to alleviate the cost and labor associated with this task. St. Petersburg College is currently paying Higher One $55,000 annually to distribute these funds.

Higher One also profits from fees associated with the OneCard. Helen Garret, executive dean of student affairs at Oregon’s Lane Community College, calls them “noodly, little fees.” These “noodly, little fees” have sparked controversy and prompted complaints on campuses across the country, including protests at Oregon’s Portland State University in 2004. OneCard fees have inspired several Facebook pages including “Students Against Higher One” created by angry students at Western Washington University. In 2009, Higher One collected $66 million in fees from student’s use of the OneCard. Higher One promotes itself as a “straight forward, no-nonsense banking experience” for students. They claim that the OneCard account is “optional and transparent” while demonizing traditional banks. A little research shows Higher One to be anything but transparent and straightforward. When compared to a few traditional banking options, the only thing clear about the OneCard is its resemblance to the predatory banking industry.

Fees

The most common fee is the $.50 debit-pin swipe fee assessed every time a student swipes his or her card and chooses debit. The OneCard is a debit card and carries a MasterCard Debit logo on its face, so it would seem logical to choose debit even though choosing credit and signing the receipt will avoid this fee. The fact that this fee setup is described in the OneCard contract and can be found on Higher One’s website does not make it “straightforward, no-nonsense banking”. In fact, traditional banks such as BB&T (Branch Banking & Trust) and SunTrust Bank charge no such fees. According to Fumiko Hayashi, a senior economist at the Federal Reserve Bank of Kansas City, only 0.6% of debit card users in the U.S. are saddled with similar fees.

Another fee that seems to be less than straightforward is Higher One’s $20 card replacement fee. Many students receive their OneCards in the mail before they even know who Higher One is and throw them away, thinking they are unwanted credit card solicitations. Some students who have not even applied for financial aid receive OneCards along with instructions to activate them, because their schools use them as mandatory student identification cards, a policy which caused the student protests at Portland State University. When these students realize their error, they are forced to pay $20 for a replacement card to obtain their residual financial aid or to use as a required student ID. According to SunTrust representative Jonathan Jimenez, they charge no fees for replacement cards while BB&T charges only $5 for replacement cards. Most bank customers receive their replacement card in 5 to 7 business days while Higher One cards take 7 to 10 business days to reach their customers. These practices seem far from competitive.

Higher One’s website does include a section on how to use the OneCard for free if you dig far enough. One of the tips Higher One shares for using the OneCard for free is to withdraw money from a Higher One ATM. Higher One ATMs are located only on school campuses and are only available during school hours. This means no money on weekends, at night, or during holiday breaks without paying a “foreign ATM fee”. Higher One has no branch locations. It would be far from fair to call Higher One “The Convenient Bank”. SPC’s Midtown location, curiously, has no ATM. In contrast, BB&T has twenty-two ATM locations in Pinellas County alone that are available 24 hours a day, 365 days a year, free of charge. SunTrust Bank has thirty ATM locations in Pinellas with the same availability.

The Credit Card Accountability Responsibility and Disclosure Act that the Federal Reserve Board enacted in 2010 bans “inactivity fees” charged to customers who do not make new purchases in a specific period of time. The OneCard, being a debit card, is not subject to these rules; Higher One charges an “abandoned account” fee of up to $19 per month. BB&T charges $7.50 per month after twelve months. Students should beware of these fees and others that are not completely transparent.

High-Risk Banking Industry

The high risk banking industry consists of companies who target customers with a history of mismanaging traditional checking accounts and/or bad credit, an industry which has seen a boom in recent years. Companies like Amscot and Ace Cash Express cash checks, open checking accounts, and issue credit and debit cards for this customer base, charging higher fees than traditional banks in exchange for the financial risk they take. The debit cards and related checking accounts these companies issue are normally under similar terms as the OneCard. Another service of these companies is payday loans. Payday loans are high-interest, short-term loans issued to customers in exchange for post-dated checks as collateral.

CashNetUSA, owned by Higher One, specializes in payday loans. CashNetUSA is a company that started as a pawn shop and expanded into the high risk banking industry. Higher One acquired CashNetUSA in November of 2009 to continue their rapid growth in the high risk banking market. In 2009, Higher One ranked 148th on Deloitte’s Fast 500 list with a 5-year growth of 1005%. The question is, how do 1.2 million students across the nation automatically become victims of the high risk banking industry? Higher One argues that many college students fall into the high-risk banking demographic, while denying being a part of that very industry. They suggest that many college students are unable to even cash paper checks without paying high-risk banking fees. These suggestions are completely false. It is true that many college students develop bad credit during their college careers, but while bad credit may prevent you from receiving overdraft authorization, it is unlikely to prevent you from opening a checking or savings account unless you are overdrawn at another bank. It appears that stipulations in Higher One’s contractual relationships with schools are responsible for students being needlessly subjected to high-risk bank fees.  Students have several good options for receiving their residual funds and the OneCard is not one of them.

Student Options

Regardless of what you do, you have to receive your residual loan money from Higher One, no choices, no options, if your school contracts with the company. You do have options about how to receive these funds and about how you do your banking. Higher One would like you to believe that these options are inferior to the OneCard or that they simply do not exist. You can decide for yourself.

The first option is the OneCard, whose only apparent advantage is that you will receive your funds the same day they are released by your school. The second option is to have the funds electronically transferred to a third-party account. This could be a traditional checking or savings account or could be the account of a family member or friend. This option involves no costs or fees and takes 2 to 3 business days. Higher One lists a third option of receiving a paper check via the mail that takes 5 to 7 business days. This paper check option is not available at all schools, though according to Higher One’s Lauren Perry, it is available for SPC students.

Students have many banking options available to them, some specifically designed for them with their unique needs in mind. BB&T offers free student and savings accounts to students 23 and younger. SunTrust currently offers free checking and savings accounts to students as well (As of March 2012 there will be a $4 monthly fee that can be waived with direct deposit). These accounts offer benefits like free checks and a number of “foreign ATM fee waives per month. These accounts do carry standard fees for overdraft, but not those “noodly, little fees” that Higher One is so fond of. These banks and many others offer accounts for people over 23 for free or with minimal charges that are usually waived with direct deposit. While Higher One does, technically, operate within the law, there are better options available.

by Keith Thompson