We recently commented that financial institutions offering financial products to college students, including debit or prepaid cards, under agreements with colleges should be planning now for the possible advent of new restrictions from the Department of Education (ED) on their practices and agreement terms, including the distinct possibility of public disclosure of the agreements themselves. A proposed rule from the ED now appears to be imminent. According to the ED’s semiannual Regulatory Agenda, this July, the ED plans to issue proposed revisions to its Title IV cash management rules (34 CFR 668, Subpart K), including those relating to acceptable methods of disbursement of eligible Title IV funds to students (34 CFR 668.164).
Over the last few months, the ED has been engaged in negotiated rulemaking concerning its Title IV rules, with the CFPB actively participating in support of the rulemaking. Many observers expect the ED’s proposal to include significant new restrictions on products that banks sell to college students, even if the product is not specifically designed to distribute financial aid.