The U.S. Department of Education has issued proposed revisions to its Title IV Higher Education Act (HEA) cash management rules that include significant new restrictions on financial products used to disburse credit balance funds to students. Credit balances result when the amount of Title IV HEA program funds credited to a student’s account exceeds the amount of tuition and fees, room and board, and other allowed charges. The proposal is the result of a negotiated rulemaking process, which was actively supported by the CFPB. The CFPB made a presentation to the negotiated rulemaking committee in which it provided its views on financial products marketed to students.
Among the key restrictions in the proposal are a prohibition against a college requiring students or parents to open or obtain an account or access device offered by or through a specific financial institution; a requirement for colleges to provide a list of account options that students and parents can choose from to receive program funds in which options are presented in a neutral manner and the student’s or parent’s preexisting account is shown prominently as the first and default option; and a prohibition on overdraft and point-of-sale fees in arrangements between colleges and third-party servicers. Comments on the proposal are due on or
before July 2, 2015. For more information on the proposal, see our legal alert.