Senate Democrats Push DeVos for Information on Payment Card Pilot

By Allie Bidwell, NASFAA Senior Reporter

A group of three Democratic senators earlier this month wrote to Education Secretary Betsy DeVos, expressing concern over the Department of Education’s (ED) plans for a pilot program to test the “payment vehicle” to use a debit card to receive and use federal aid dollars. 

The senators—Elizabeth Warren of Massachusetts, Robert Menendez of New Jersey, and Richard Blumenthal of Connecticut—are not the first to raise questions with the plans for the payment vehicle. Sen. Ron Wyden (D-OR) in November also wrote to DeVos, expressing concern over the potential misuse of student data. A report from the Consumer Financial Protection Bureau (CFPB) on college-sponsored deposit and prepaid accounts that was published as the result of a Freedom of Information Act (FOIA) request also showed some agreements between colleges and third party providers still charge fees CFPB said could be a risk to students. ED’s Chief Strategy and Transformation Officer A. Wayne Johnson in November reiterated that third party companies operating the payment vehicle platform would not receive individual student data.

But in the letter sent to DeVos last week, the senators said they were “alarmed by the message the card sends to students that their spending habits are going to be monitored by the federal government,” that ED is “essentially selling its services to corporate partners,” and that the agency would have “unprecedented access” to student spending data.

“As you move forward with this new pilot program, we request [ED] ensure students have access to safe and affordable financial products by securing stronger consumer protections for students and safeguarding their privacy and data,” the letter said.

The senators also said they were concerned that in partnering with a third party company, ED would give “not only its implicit endorsement” of that company, but also “marketing access to potentially millions of students.”

“Students should not be directed toward a financial product by the government; instead, the government should be protecting students, not selling a relationship to financial institutions,” they wrote.

The senators said they were alarmed that ED would collect any data on students, even in aggregate form, through the pilot program, and questioned the motive for doing so. They also criticized ED for not more strictly enforcing the cash management regulations as a way to reduce fees for students.

The group asked ED to provide more information on a number of topics, including how it is enforcing current cash management regulations and how it has worked with the CFPB to do so, what issues ED has identified to warrant the need for the payment vehicle pilot program, what consumer protection laws would apply, and more.

They asked that ED respond by March 27, 2019.

 

Publication Date: 3/19/2019


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