Student Loan News: Public Service Loan Forgiveness and the Debit-Card Trap

Welcome to Student Loan News, a weekly summary of developments and events affecting college debt in the U.S. Join us each Friday for a look at goings-on that could impact your own student loan situation.

Beware the debit-card trap

A new study suggests that college students are getting scammed by expensive debit-card accounts which banks are marketing on campus.

“These campus debit-card accounts can come with high and unexpected fees that put college students, many of whom are managing their own finances for the first time, at risk,” said the authors of a report on the study, which was conducted by the policy research groups U.S. PIRG Education Fund and the Frontier Group.

Specifically, the study found that in a single year, college students paid $24.6 million in debit-account fees, despite the abundance of low-fee and no-fee accounts for customers enrolled in university.

Some banks paid the schools for the right to market to their students, and the accounts in those cases tended to charge higher fees. “There is a clear link between high fees and paid marketing agreements. To rectify this, Congress should consider legislation that denies banks the opportunity to strike paid marketing agreements with schools for access to a captive market of students,” the report said.

The report mentioned Wells Fargo in particular for marketing high-fee accounts to college students, going so far as to call for the Department of Education to investigate the bank to see if the products it offers “are truly in students’ best interests.” As we’ve reported earlier, Wells Fargo was also purportedly named in a government report on this same issue.

How it affects YOU: If you’re in college and have a debit-card account that carries hefty fees, know that there may be better options out there for you. Here’s a list of some banks to consider with great deals for students. And regardless of whether you’re in school, here are some best practices for avoiding bank fees

Public Service Loan Forgiveness: New numbers are grim

In response to a request from the Senate, the Department of Education provided fresh stats on its Public Service Loan Forgiveness (PSLF) program this week, and — just like the last time — the data shows very few applicants are getting approved.

The new information shows there had been 38,460 applications for PSLF as of last December, but only 262 candidates (or less than 1%) had gotten their student loan balances wiped away. However, those listed as rejected also included applicants who still hadn’t completed the 10 years of payments necessary, as well as some who “had not previously filled out a formal loan forgiveness application,” according to a Washington Post report.

How it affects YOU: For anyone with student loans who works in public service — whether at a nonprofit, at a government agency, with the military or elsewhere — it’s at least worth investigating the PSLF program. If you are interested, be careful in terms of the many requirements, since (as the numbers make clear), it can be very difficult to get approved.

Also in the news …

  • The march to free community college rolls on. West Virginia has enacted a law offering grants to community college students, provided they maintain a 2.0 grade average and pass a regular drug test, among other requirements, according to U.S. News & World Report. With the move, West Virginia joins the like of Tennessee, Oregon and other states with similar programs, Politico notes.
  • Hyundai has a deal for California and part of Arizona: If you buy or lease one of their cars from a dealership in those markets, you could get up to $900 to pay down your student loans. You can find more info in their press release here.
  • An Education Department panel has agreed on proposed rule changes as part of the administration’s “efforts to scale back and simplify the regulations,” Politico reports. The details are now slated to be published for public comment.

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