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USDOE’s New Idea: Student Loan Debit Cards

February 1, 2018

On January 19, 2018, the US Department of Education (USDOE) issued this pre-solicitation notice of a pilot program involving issuing student loan balances via debit card:

This is a PRE-SOLICITATION NOTICE to announce the anticipated release of a solicitation for contractor support for Federal Student Aid (FSA)’s Payment Card Program Pilot on or about February 2, 2018 and to share a draft of the solicitation.

FSA intends to launch a FSA Payment Card (“FSA Payment Card Program”) to facilitate FSA loan refunds, along with other funds, originated by participating schools. Currently, FSA loan money is received directly by the Institutions of Higher Learning whereby schools apply those funds to student accounts for tuition and fees. The Institutions of Higher Learning then refund the overage to the student which is accomplished in a variety of ways: cards, ACH, manual checks, and even cash disbursements.

The purpose of the FSA Payment Card Program Pilot (“Pilot”) is to test, with a select number of schools, an FSA Payment Card whereby federal student loan customers (“Customers”) will have a consistent, economically advantageous and timely method to receive FSA loan refunds. To meet FSA’s “best possible” approach to customers’ needs, the Program Pilot will likely require a unique card product, different from existing credit, debit, or prepaid cards and checking accounts. FSA’s focus for the Pilot would be delivering the FSA Payment Card Program for current, in-college student customers who receive regular refunds of FSA student loans throughout the year.

More details regarding the Program and the requirements of the anticipated contract can be found in the attached draft document.

The linked, 14-page draft document details of the program, including defining “program manager” as “the party responsible for providing a turnkey solution – the combination of Issuing Bank, Processor, Card Brand and Product” and the “program administrator” as “Federal Student Aid (“FSA”), an office of the Department of Education.”

And, as one might expect in market-driven-ed lingo (and as implied in the synopsis above), the “customers” are “Individuals who apply for FAFSA or are FSA Title IV loan recipients.”

Some more specifics on card acquisition and usage:

The Customer journey should include:

• Applying for the Card: In-college students would have the ability to sign up for the Payment Card Program through mobile or online applications, or a point of presence at a School location, ideally at the point and time they sign a promissory note. This would trigger, at the Customer’s election, the establishment of a FSA Payment Card account.

• Loading the Card: Schools would refund overages to the Payment Card and communicate with the student about the funds status as they currently do with other refund processes. Additional funds may be loaded to the Card Account from additional sources in multiple different ways.

• Using the Card: Students would then be able to use the loan refunds and all other funds allocated to the card for purchases of everyday goods and services. Customers would benefit from integration of the FSA Payment Card Program with the FSA Mobile App., Furthermore, a rewards program could potentially be implemented whereby Students could receive special pricing/discounts from specific merchants.

• Card Program Related Customer Service: Students would have access to mobile self-service as well as call center assistance to resolve card-related issues. Schools and FSA would also be provided with the ability to obtain assistance from the customer service center on behalf of, and in support of, card Customers.

• Additional features of the Program will include:

o No fees charged to student or school
o Ability to issue checks from the app
o Real time recordation of purchases and balance status
o Real time transaction alerts and controls.
o Direct connectivity to the Payment Card Authorization stream to allow for real-time program enhancements
o Real time interface with the FSA myStudentAid Mobile app “Super Portal”

When I first read this proposal, it surprised me that a USDOE led by Betsy DeVos would promote a system that not only tracks student loan money but also has the capability (and intention, as the proposal further elucidates) of regulating how the money is spent.

When it comes to school choice, DeVos steers clear of anything that hints at such obvious oversight; thus, it seems out of character (hypocritical?) for her to promote what is on its face an oversight and accountability effort. For example, in September 2017, DeVos rescinded USDOE’s Title IX guidance on campus sexual assault (three civil rights orgs are suing). In October 2017, DeVos rescinded 72 USDOE special education policy documents; the same month, 18 states sued her USDOE for its rollback on for-profit-college regulations.

Deregulation is a trademark of the American Legislative Exchange Council (ALEC), a primarily-Republican, corporation-driven political lobbying group to which DeVos belongs. In July 2017, she offered a keynote at ALEC’s annual conference in Denver, Colorado.

DeVos actively works against regulation.

That noted, DeVos’ USDOE is soliciting financial institutions to manage this pilot program (in other words, outsourcing management to the private sector, in line with ALEC’s corporate-profiteering agenda), which is in keeping with DeVosian ideology– and included in the outsourcing attempt are hints (subtle and otherwise) at how the private-sector manager might fiscally benefit from such management.

Indeed, as already noted, the draft document mentions a rewards program– which could well be a vehicle USDOE uses to steer student aid into the coffers of certain companies via incentives. Too, the draft includes the following, “future customer” (and even “current customer for other services”) enticement:

Importance of the Program

Through this Pilot and a subsequent expansion of the Program, the Program Manager, Card Brand, Processor and Issuing Bank will have the opportunity to partner with FSA to reach and enable U.S. students’ higher education dreams. Student loans from FSA are often a customer’s first encounter with a financial services product and one of their first experiences with the Federal government. The Next Gen FSA Payment Card Program will be the first step in exploring a new, meaningful way to build a stronger, lifetime relationship with FSA’s Customers.

Cross Program Customer Opportunities

While the data associated with the FSA Payment Card Program will be highly restricted as to cross marketing use, there will exist the opportunity for customers to specifically grant permission with regard to receiving proposals, offers or providing access to their privileged data for purpose of developing other financial service relationships. For purpose of absolute clarification, any access to Customer data for the purpose of developing other financial relationships will be and must only be granted on a SPECIFIC permission basis by the Customer.

And further along in the section detailing limitations on program manager and other fees:

Section 9 – Program Fees & Costs

This must be a “free” program for the Customers and Schools.

1. No Fees to Customers for any of the following

– Annual Membership
– Activation
– Load/Reload
– Swipe
– Electronic Generated Checks (Up to five per month)
– NSF
– Overdraft
– Account Maintenance
– ATM withdrawals, In-Network
– Three ATM withdrawals, Out-of-Network
– Alternative Cash Points (Tellers or Merchants)
– Account Dormancy
– Foreign Transactions

2. This must also be a “no tax” program for participating Schools with regard to tuition, fees, and other direct School services.

3. Interchange and Debit Fees

– On Campus – 0% interchange or $0 debit fees tied to Participating Schools (tuition, fees and school owned merchants like their bookstore or cafeteria)
– Off Campus – market standard interchange and debit fees for off-campus merchants may be applied.

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. [USDOE chose to bold this statement.]

Even though USDOE states that the program manager cannot charge fees for its student loan debit account services, and even though USDOE notes in another section that one of its goals with this debit arrangement is to send caution messages to “customers” about accumulating student loan debt, in soliciting its for-profit program vendor, USDOE is handing over millions of students as potential, immediate “customers” to become entrapped in immediate debt via other *borrowing opportunities* that the program manager could offer as it sees fit.

In fact, USDOE begins its draft document by dangling this news before the eyes prospective program managers, whose view might already be blurred by visions of dollar signs:

Federal Student Aid (FSA) is undertaking transformative measures to establish the Next Generation Financial Services Environment (“Next Gen”) whereby FSA customers willenjoy a world-class customer experience throughout the lifecycle of their education finance journey. A mobile-first, mobile-complete, mobile-continuous digital platform, complemented by an omni-channel engagement strategy, will be implemented so as to provide easier, more seamless and more frequent customer interactions resulting in short term and long term positive outcomes for students and taxpayers. FSA’s size and scale of consumer loan portfolio operations are on par with the largest banks in the United States:

• Over 40 million customers across the student lending lifecycle
• Total lending portfolio has over $1.3 trillion in outstandings
• Annually originates over 17 million student loans
• Annually processes nearly 250+ million payment transactions
• Annually processes up to 50+ million disbursements totaling more than $125
billion

Over 40 million customers! And a captive audience, at that, for being bombarded with ads for “other services” conveniently provided by the fortunately-selected, USDOE program manager of a program that USDOE notes it will consider, following the pilot, “whether and how to modify and scale the Pilot to include a larger number of Customers and Schools.” Moreover, USDOE has the “intention to expand to pre-college student customers and post-graduate students upon satisfactory determination of success of the Pilot.”

So long as the for-profit program manager steers clear of tapping into a “customer’s” federal student loan money, the program manager need not wait to to start that “long-term, even life-long relationship for other financial services and products.”

Mice in abundance.

Trap set.

money on mousetrap

______________________________________________________________________________________

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School Choice: The End of Public Education? 

school choice cover  (Click image to enlarge)

And here are two more: A Chronicle of Echoes: Who’s Who In the Implosion of American Public Education and Common Core Dilemma: Who Owns Our Schools?. Swell stuff.

both books

Don’t care to buy from Amazon? Purchase my books from Powell’s City of Books instead.

From → Betsy Devos

5 Comments
  1. Duane E Swacker permalink

    I wonder which of Betsy’s cronies will monetarily benefit from this one?

  2. Christine Langhoff permalink

    Each day, they accomplish something more breathtakingly despicable than the day before.

  3. Laura H. Chapman permalink

    long post. Educations Savings Accounts, promoted by Jeb Bush, Betsy DeVos, and others are being migrated into a platform for a la carte education.

    This year (January 2018) Florida will have in place an on-line user-friendly marketplace for education with a catalog of products and services eligible for purchase by parents and authorized caregivers. The platform, called MyScholarShop™, will resemble Amazon, complete with parent/caregiver reviews of the authorized fare. It is not yet clear who is in charge of approving the products and services in the on-line catalog. The press release says parents: “will simply go online to the pre-approved catalog and “Pick It, Click It, Ship It.” The cost will be taken directly from their education savings account. Supplies, if ordered, will be delivered to customer-provided address.

    This project has been in the works with Step Up For Students, the Florida agency that distributes money earmarked for Gardiner Scholarships. These state-funded scholarships are for special education—nearly 10,000 students (autism spectrum disorder, muscular dystrophy, cerebral palsy and spina bifida) who, on average, are allocated $10,000 each per year. These approved services include private school tuition and fees, private tutoring, occupational therapy, instructional materials and other services.

    Step Up For Students also manages the income-based Florida Tax Credit Scholarship Program. Students qualify if they participate in the national free or reduced-price lunch program. Students may also qualify if they are homeless, in foster or out-of-home care. These scholarships can be used to offset the transportation cost to an out-of-district public school or for help with tuition to a private school. When those students are included (no date indicated, but in the school year 2017-2018) the MyScholarShop™ direct-pay platform will serve about 115,000 students with the prospect of saving the labor and cost of printing about 500,000 checks under the old system.
    The system will include a product and service-provider rating system “ so families can assist each other in making appropriate selections for their children.”
    The MyScholarShop™ platform is described as a Partnership with SAP Ariba and Premikati.

    SAP Ariba is a cloud-based system of business management, with analytics that track inventory (supplier information), performance (sales), software solutions for creating digital invoices, and tracking cash flow. Features of SAP Arib are available in four pricing tiers. All tiers have transaction fees, based on the volume of annual financial transactions with customers. All tiers also have a subscription fee, based on the number of documents in your annual transactions with customers, and your use of technology. SAP Arib is designed to help “suppliers connect with profitable customers’ among other business services (provided in 190 countries, with three million companies).

    Premikati, Inc. provides services that cut red tape for users of the SAP Arib platform (e.g., planning, financial, contract management, legal). According to the website, Premikati has a new line of business, a national Group Purchasing Organization (GPO) for K-12 education and for non-profits. A GPO is designed to secure discounts with select vendors by leveraging the collective purchasing power of its members.

    States that are legislating vouchers, scholarships, tax credits, and other per-student payment systems are likely to see the MyScholarShop™ platform as an efficient way to manage the distribution of funds and with a digital trail of who spends the allotted funds on which products and services. So far, it is not clear whether student privacy is protected. Big data could be sold (made into gold). https://www.businesswire.com/news/home/20171129005845/en/Step-Students-Partners-SAP-Ariba-Premikati-Create

    The MyScholarShop™ has the potential of becoming the go-to place for parents/caregivers/students to spend public money—vouchers, tax credits, scholarships, per-student allocations of public funds in addition to discounted merchandise that might be organized by brands (e.g., Montessori). Some charter schools have formed non-profits functioning much like GPOs (e.g., Summit) and some entrepreneurs (e.g. Alt-School, WeWork ) want to sell their patched together curriculum materials and/or software.

    I think MyScholarShop™ is ripe for corruption. I have not found information about who qualifies as a “vendor” and how. If customer ratings enter into an approval /endorsement process, then some additional criteria should be in place to prevent rigging the ratings (e.g., If you give me a great rating, I will give you three free lessons on the guitar).

    I can imagine an expansion of MyScholarShop™ into the marketing space called Great Schools.org. Data on school performance, including on-line programs is posted there with a convoluted rating scheme for “school quality.” For a fee, companies can lease the data and push products. In addition to charter schools networks, Zillow pays to lease the data (perpetuating redlining). For a minimum fee of $5000 you can but custom ads that target options such as zip code, grade level and content. Advertisements for education related ballot issues can be purchased, subject to approval.

    Major “supporters” and funders of Greatschools.org are known for being friendly to market-based education: Walton Family Foundation, Laura and John Arnold Foundation, Bloomberg Philanthropies, Carnegie Corporation of New York, Einhorn Family Charitable Trust, the Leona M. and Harry B Hemsley Charitable Trust, Bill and Melinda Gates Foundation. Those are the biggies, but there are 14 others

    MyScholarShop™ and GreatSchool.org are helping approved advertisers reach parents and students. In theory “the market” decides which products and services are “worthy” of purchase, even if these have little documented value or are outright quackery. Betsy DeVos seems to have retained an ownership stake in her questionable business, Neurocore, and there are more “brain-based” products/services out there, among others that “choice” dollars are funding or could fund. Who decides and what criteria govern decisions? See https://theconversation.com/how-neuroscience-is-being-used-to-spread-quackery-in-business-and-education-30342 and this three part series. https://www.huffingtonpost.com/entry/scientology-schools_us_5a2d8b9ee4b069ec48ae4109

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  1. Florida’s 2018 Education Savings Accounts a Vehicle for “A La Carte” Education | deutsch29

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