It took Mario Parker-Milligan less than a semester to decide that he was paying too many fees to Higher One, the company hired by his college to pay out students' financial aid on debit cards.
Four years after he opted out, his classmates still face more than a dozen fees - for replacement cards, for using the cards as all-purpose debit cards, for using an ATM other than the two on-campus kiosks owned by Higher One.
"They sold it as a faster, cheaper way for the college to get students their money," said Parker-Milligan, 23, student body president at Lane Community College in Eugene, Ore. "It may be cheaper for the college, but it's not cheaper for the students."
As many as 900 colleges are pushing students into using payment cards that carry hefty costs, sometimes even to get to their financial aid money, according to a report to be released Wednesday by a public interest group.
Colleges and banks rake in millions from the fees, often through secretive deals and sometimes in apparent violation of federal law, according to the report, an early copy of which was obtained by The Associated Press.
More than two out of five U.S. higher-education students - more than 9 million people - attend schools that have deals with financial companies, says the report, written by the U.S. Public Interest Research Group Higher Education Fund.
The fees add to the mountain of debt many students already take on to get a diploma. U.S. student debt tops $1 trillion, according to the Consumer Financial Protection Bureau.
Student loans have surpassed credit cards as the biggest source of unsecured debt in America, according to the CFPB, which regulates cards and private student lenders.
Among the fees charged by Higher One, according to its website, is a $50 "lack of documentation fee" for students who fail to submit certain paperwork. The U.S. Department of Education called the charging of such fees "unallowable" in guidance to financial aid officers issued last month.
Higher One founder and Chief Operating Officer Miles Lasater said in an email that the company takes compliance with the government's rules "very seriously," and officially swears that to the government each year.
"We are committed to providing good value accounts that are designed for college students," he said, and students must review the company's fee list when they sign up for an account. He cited a study commissioned by Higher One that declared Higher One "a low-cost provider for this market." The same study found that the median fees charged to the 2 million students with Higher One accounts totaled $49 annually.
Among the fees charged to students who open Higher One accounts: $50 if an account is overdrawn for more than 45 days, $10 per month if the student stops using his account for six months, $29 to $38 for overdrawing an account with a recurring bill payment and 50 cents to use a PIN instead of a signature system at a retail store.
Higher One has agreements with 520 campuses that enroll more than 4.3 million students, about one-fifth of the students enrolled in college nationwide, according to public filings and the U.S. PIRG report. Wells Fargo and US Bank combined have deals with schools that enroll 3.7 million, the report says.
Lane Community College's president, Mary Spilde, said in an interview that the real problem is a "lack of adequate public funding," which forces students to seek financial aid and colleges to find ways to cut costs.
"Many institutions are looking at ways to streamline and to do things that we're good at, which is education and learning, and not banking," Spilde said.
Programs like Higher One's shift the cost of handing out financial aid money from universities, which no longer have to print and mail checks, to fee-paying students, said Rich Williams, the report's lead author.
"For decades, student aid was distributed without fees," Williams said. "Now bank middlemen are making out like bandits using campus cards to siphon off millions of student aid dollars."
Students can opt out of the programs and choose direct deposit or paper checks to receive their college aid, but relatively few do. The cards and accounts are marketed aggressively using college letterhead and websites carrying the endorsement of colleges. Higher One also warns students that it will take extra days if they choose direct deposit or a paper check.
In the end, students feel locked into accounts before they have a chance to shop for a better deal, Parker-Milligan said.
He said that's especially tough for poor students who rely on food stamps and other social services. Those students budget down to the penny, and don't plan on paying a fee when Higher One's ATM runs out of cash, he said.
Offerings by financial companies vary by campus. Some issue checking accounts with debit cards. Others offer prepaid debit cards, which are similar to bank debit cards but can carry higher fees and offer fewer consumer protections.
Often, students' campus ID cards double as payment cards. At the University of Minnesota, TCF Bank issues cards that serve as school IDs, ATM and debit cards, library cards, security cards, health care cards, phone cards, and stored-value cards for vending machines, the report said. TCF also has branches on campus and 25-year naming rights to the football stadium. Its cards charge similar fees, the report says.
Having such visibility on campus is a big benefit for banks seeking exclusive access to an untapped group of potential customers. Many banks are willing to pay universities for the privilege.
Under its contract with Huntington Bank, Ohio State University will receive $25 million over 15 years, plus a sweetener of $100 million in loans and investments for the neighborhoods around campus, the report said. Florida State receives a portion of every ATM fee paid by a student, it says.
It's difficult to get a full picture of how much money the schools are getting because most of them refuse to release their contracts with banks. Only a handful were available to the authors of the report.
Ohio State and Florida State did not immediately respond to requests for comment. The National Association of College and University Business Officers, a trade group involved in the issue, did not respond to multiple requests for comment.
Lane Community College receives no payments under its contract with Higher One, Spilde said. Lasiter said Higher One does not "offer revenue sharing" to colleges that it partners with. However, Higher One does pay some universities under existing contracts, according to the U.S. PIRG report.
Campus card deals have become more popular in part because of recent legal changes that cut into the profits banks can generate from students.
A 2009 law banned credit cards given to students who had no way of repaying. It forced colleges to disclose deals with credit card companies and stopped some forms of marketing, such as offering students free gifts in exchange for obtaining a credit card.
Until recently, banks also made a lot more money from student loans. They extended federal aid to students, and also offered confusingly similar, higher-cost private loans alongside the government programs. Congress cut them out of the equation in 2010.
Neither change affected debit cards. As the recession forced states to slash higher education budgets, companies such as Higher One, Wells Fargo and US Bank approached colleges with an attractive proposition: The companies would assume the cost and hassle of handing out student aid funds, often paying for the privilege.