Debit Card Financial Aid Scam Hits Thousands of California Students

Huck/Konopacki Labor Cartoons

Close to half of California’s community colleges and numerous other colleges and universities are now disbursing financial aid through debit cards contracted through Higher One, the Bay Citizen reports. According to the U.S. PIRG Education Fund, Higher One is the largest player of its kind in the U.S., with 520 partner campuses, enrolling over 4.3 million students nationwide.

Not only do students have to pay fees in order to access their financial aid, but Higher One has been accused of charging multiple fees, aggressively marketing their products and violating customers’ privacy. Earlier in the year, Ventura College student Sherry McFall filed a class-action lawsuit against Higher One, accusing them of creating bank accounts for students without their consent. The suit also claimed they improperly disclosed fees.

Traditionally, students would receive a financial aid check which they would deposit in their bank. They could then write checks against those funds or withdraw cash, as needed, to pay for food, rent, books or other expenses.

With the Higher One debit cards, students can still do this, but only after transferring the funds to another bank account. It is much easier to simply use the card as a debit card, which many do, especially after being bombarded with advertisements from the company telling them this is the fastest and easiest way to access their money.

Once they start using their cards, Higher One has numerous ways to skim off portions of their financial aid. For example, there are several fees that are charged upon activation of the card, as well as 50 cent transaction fees each time the card is used to make a purchase, according to the Bay Citizen report. Furthermore, if students use an ATM that does not belong to Higher One, they also get charged $2.50 by Higher One, plus whatever fees are charged by the ATM. And if they do not use their account for six months of longer, they are assessed a $10 month fee.

While Higher One says it will vigorously fight the lawsuit, it admits in its own annual report that persuading students to activate a Higher One account is part of its sales efforts. Furthermore, in an interview in the New Haven (Conn.) Independent, Higher One President, Miles Lasater, said that half of its revenues ($88 million in 2011) come from additional fees.

Cali Community College Budgets Slashed $564 million

California’s community colleges were slapped with a $102 million cut in January. This followed a $313 million cut at the start of the school year. While these cuts were devastating, at least they were expected. Now, according to Kathryn Baron, writing for Topics in Education, these same schools face a “February Surprise” of an additional $149 million cut that was not planned and that brings the total cuts to a whopping $564 million this fiscal year.

The “surprise” resulted from two miscalculations: property taxes and student fee revenues were both substantially lower than expected.

The Department of Finance was overly optimistic in its projection of how much revenue could be raised by increasing student fees from $26 per unit to $36 per unit, creating a shortfall of $107 million. Part of the shortfall was due to a large increase in students applying for Board of Governors fee waivers. Considering the dismal state of the economy, one must wonder how they could have overlooked this possibility.

Students, as usual, are the ones getting reamed—this time doubly, with a nearly 40% increase in tuition up front, followed by program cuts and a possible mid-year fee increase to offset the system’s miscalculations and shortfall.

Jerry Brown: No Friend of Teachers or Labor

Huck/Konopacki Labor Cartoons

Led by the California Teachers Association (CTA), labor pumped millions of dollars into Jerry Brown’s war chest, helping him to defeat billionaire Meg Whitman in the race for governor of California. They were not just fighting for “anyone but Meg.” They actually believed that Brown would do great things for public education and public sector unions.

One of the first things Brown did once elected was to appoint a CTA lobbyist to the state board of education, which was really more of a favor from one 1%-er to another, than a boon to teachers or students. He also cobbled together a budget deal that promised no more cuts to K-12 education. Educators and the CTA considered this a victory and a great favor from their “pro-education” governor, despite the fact that it did nothing to restore the $21 billion that had been cut from K-12 education over the previous 3 years and even though the budget slashed more than $1.5 billion from higher education. However, even this was nothing more than a bit of political hocus pocus, predicated as it was on overly optimistic revenue projections.

Brown’s chickens are coming home to roost. The revenue projections were so far off that the state is now looking at a new $13 billion deficit. According to the Washington Post, the state is facing $2 billion in automatic cuts on the first of the year, much of that coming from K-12 and higher education. There will be another $10 billion deficit for the fiscal year starting on July 1^st and again K-12 and higher education will likely take big hits.

The California State University (CSU) system will lose $100 million, news the prompted the CSU trustees quickly vote for another 9% fee increase. They did this behind closed doors, possibly in violation of state sunshine laws, to avoid disruptions by student protestors. Community college students will be forced to pay another $10 per unit, while K-12 districts will lose $1.1 billion, or $180 per child, according to the Thoughts on Public Ed website.

You Can Get Into College, But Maybe Not Out (And That Might Be O.K.)

A recent study followed over 250,000 California community students for six years and found that only 30% completed a certificate, a degree or transferred to a four-year university within six years. The study seems to suggest that community colleges are failing, as few students are completing associates degrees or parlaying their credits into four-year bachelor degrees.

While this statistic is impressive and possibly indicative of deep problems within the community college system, it is no smoking gun that the community college system is failing. It is important to recognize that community colleges have a significantly different role than K-12 schools and four-year universities, a legitimate role that may be responsible for these numbers. The public expects all children to graduate from high school. And most undergrads enter four-year colleges with the goal of obtaining a degree and the skills to get a job. However, many students who enroll in community colleges have no intention of obtaining two-year associates degrees or transferring to four-year universities. Some enroll for the purpose of personal growth and enrichment, taking a few art, music, or language classes, for example. Others hope to improve their career or business opportunities and might take a few classes in business, economics, or design. For many people, the cost of a PE class at the local community college is far cheaper than a gym membership and gives them access to much of the same equipment, or yoga instructors, or coaches instead of personal trainers.

The study attempted to correct for this bias by only including “degree-seeking” students, as determined by their enrollment in more than six units during their first year. However, this is only an estimate and not a true measurement of who really enrolled intending to earn a degree. Six units is only two-three classes, not a very ambitious plan for someone seeking a degree and one that could easily be undertaken by a person seeking professional growth or personal growth.

Even if the statistic does only count degree-seekers, there are several explanations for the low completion rate that would not be the fault of the community colleges. For example, because community colleges are much more affordable than four-year universities, many people enroll because it is all they can afford. If they are already suffering financial insecurity and their financial situation worsens (or if improves with sudden employment), they may be forced to quit. Dropping out of a community college is easier than a four-year school, where one gives up a potentially much larger investment.

Another explanation that is worth considering is the educational backgrounds of the students. Many enroll in community college because they lack the grades to get into a four-year school. This may be due to poor literacy, weak study skills, lack of perseverance or low self-efficacy, any one of which would increase the chances of failure and dropping out.

The study found that black and Latino students failed to complete their community college programs at a slightly higher rate than white students: 70% of all degree-seeking students failed to complete their degree or certificate, while 75% of black students and 80% of Latino students failed to complete their degree or certificate. While this should be of particular concern, this particular ethnic achievement gap is a relatively small compared with K-12 graduation rates.

California Plans to Gut Higher Education

March 4, 2010 Higher Ed Demonstration by SpotReporting

Jerry Brown’s plan to slash $1.4 billion from higher education in California will have dire consequences for students, teachers and staff at the UC, CSU and community college systems. The three systems will have to lay off thousands of employees, cut classes, and gut services. And this is assuming voters approve a tax increase for themselves in June. Otherwise, the cuts could far surpass the initial estimate of $1.4 billion.

California Community Colleges Chancellor Jack Scott said that the cutbacks will result in 350,000 students being unable to enroll in any classes within the 112 school system. The community college system is among the cheapest in the nation, and will continue to be, even with the $10 per unit fee hike that will be implemented next year. For many of California’s unemployed, it has become a refuge where they can use their time constructively and learn new job skills while waiting for the job market to pick up again. However, with the cuts and losses of teachers and course offerings, many will lose this opportunity.

March 4, 2010 Higher Ed Demonstration by SpotReporting

At the California State University system, which will lose $500 million next year, Chancellor Charles B. Reed said they would consider reducing enrollment, eliminating classes, laying off staff, furloughing employees and increasing class sizes. He did not rule out tuition hikes, either. They have already approved a 5% increase for this year and an additional 10% hike for fall 2011, bringing undergraduate tuition to $4,884 per year, plus an additional $1,000 for campus fees.

UC, likewise, did not rule out further tuition hikes. They already raised tuition by 8% in November, bringing the full cost for a year at UC to $30,000. This does not include the costs of food and housing, which at many UC schools, especially UC Berkeley and UCSF, can run an additional $20,000 per year. Between 1990 and 2009, tuition increased by 277%, and then it went up an additional 32% last year.

For-Profit Colleges are Pedagogical Poverty Pimps

A new report by the Education Trust says that students at for-profit colleges are more likely to drop out and have greater debt than those at public and private non-profit schools. For-profit schools aggressively recruit students, but do little to retain them, with only 22% graduating after six years, compared with 55% at public institutions. 96% of the students who do graduate from for-profit schools are left with large debts, compared with 62% at public schools, and the default rate for these loans is double the rate at public and private non-profit schools, suggesting that the quality of education at these schools is insufficient for graduates to secure well-paying jobs.

Like subprime lenders, for-profit schools prey upon the poor and tend to look the other way and ignore obvious risk factors, accepting anyone who is willing to pay their high tuition and lousy loans. 50% of the students at for-profit schools come from low income backgrounds. Many of these students did not do very well in high school and could not get into a more reputable 4-year institution.

For-profit schools boast that they provide great opportunities for low income students to earn degrees and move into lucrative careers. However, many aspiring college students lack the skills to succeed in college, like good time management, perseverance or the ability to read and write at a college level. Saddling them with enormous debt and abandoning them to either sink or swim is not much of an opportunity. In contrast, small public community colleges are inexpensive and often provide remedial and support classes and counseling to help struggling students, without leaving them in hock up to their eyeballs. Many also articulate with local 4-year universities.