Students

Choosing your first bank account is an important decision. Unlike that first school ID photo, your first banking relationship could last long after you graduate. Making a smart decision now will mean fewer surprise fees that can add up later.

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1. Choose an account as soon as possible. You should try to find an account before you start school. Don’t feel limited to only the banks or credit unions that have ATMs on or near campus; some will automatically reimburse fees for using any ATM. Consider accounts that offer services like remote check deposits, mobile apps, and online bill-pay. Signing up for a bank account now can save you headaches later, and researching accounts with the lowest fees can save you money.

2. Avoid paying unexpected fees. Dig deeper when accounts are marketed as “free” or “easy” – very few accounts charge no fees at all. Does your bank charge monthly fees? Many require minimum balances or regular direct deposit to avoid monthly fees. What about out-of-network ATM fees, overdraft fees, fees to use your debit card, and fees for services like online bill-pay? Knowing if and when fees will be charged could save you hundreds of dollars in fees each year. While half of young Americans never overdraft, the other half average approximately seven overdrafts a year. Overdrafts can cost more than $30 each, so that’s potentially a lot of money taken out of your pocket.

3. Sign up for direct deposit as soon as possible. Once you have a bank account, sign up for direct deposit with your school before classes start. If you are expecting money from your financial aid office, you’ll often get it faster this way – it can be weeks before the school gets to writing you a paper check.

Choosing a bank account

You have many bank accounts options. Here are are three possibilities and key factors to compare when making your decision.

	Virtual checking accounts	Student checking account	School-affiliated banking services
How it works	Some financial institutions provide exclusively online banking services that are comparable to a traditional checking account	Some banks and credit unions offer student checking accounts with discounted fees to establish long term relationships with new customers	Many colleges have a bank they partner with to offer students campus affiliated checking accounts or prepaid debit cards
Benefits	May waive or reimburse ATM fees, even those for out-of-network ATMS Often include online banking and bill-pay Often have mobile apps for things like remote check deposit Often won’t let you overdraft your account	Free access to in-network ATMs May include online banking and bill-pay Access to traditional in-person bank branches	On-campus branch locations and ATMs May include online banking and bill-pay May offer discounts at local or campus businesses Sometimes your student ID card can be used to access your money
Risks	Generally do not have in-person customer service options	Possibly charge monthly maintenance fees – up to $12 a month in some cases – if you don’t meet the minimum balance or the bank’s other enrollment criteria, like maintaining a full-time enrollment status at school May charge more than $30 per overdraft, which can add up quickly, especially if you opt in to coverage for ATM and debit card overdrafts	Could charge fees every time you use your debit card Don’t always provide the ability to write checks May charge inactivity fees each month for not using your account frequently Possibly charge monthly maintenance fees – up to $12 a month in some cases – if you don’t meet the minimum balance or the bank’s other enrollment criteria, like maintaining a full-time enrollment status at school May charge more than $30 per overdraft, which can add up quickly especially if you opt in to coverage for ATM and debit card overdrafts

Accessing your financial aid

After your school takes out the cost of tuition, fees, and any on-campus living expenses from your total financial aid award, there is often money left for you to use for other expenses, like books. You normally have several options for how you get that money, including direct deposit to a bank account, to a card that might also double as your student ID, by check, or cash.

We recently published an advisory to consumers about financial aid disbursements, and we encourage you to choose your disbursement option wisely. They all have benefits and risks, so the most important thing is that you understand your needs and what potential fees you will be charged to use each option.

	Direct deposit to personal account	Paper check	Financial aid disbursement account
How it works	Once you choose the best bank account for you, share that information with your school, and they will deposit additional aid funds directly to that account	Schools generally must offer a paper check or cash option no later than 14 days after the funds are available	A school may partner with a bank or another third party to handle financial aid disbursements The most common option is a debit card attached to bank account that has your financial aid deposited in it You are not required to use the bank chosen by your school
Benefits	You can pick an account that offers what you need and charges few or no fees You can access the disbursement quickly with direct deposit	You can deposit your money into the account of your choice and do not need to provide additional personal financial information	Often the quickest way to access to your disbursement if you haven’t already provided your school with direct deposit info
Risks	No significant risks	If you use a check casher, they may charge as much as 4% of the check amount You may not be able to access your funds immediately after making a deposit	The school makes the agreement with the bank, not you You won’t be able to shop for a low-cost product, and these cards and accounts may come with fees you could avoid by shopping

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The Consumer Financial Protection Bureau is issuing a consumer advisory today to all students expecting to receive scholarship and student loan proceeds onto – what appears to be – a school-endorsed debit card. We are also asking consumers to tell us about their experiences getting their financial aid funds.

Yesterday, the Federal Deposit Insurance Corporation, another banking regulator the CFPB works closely with, fined one of the largest providers of campus debit cards.

Many college students, especially those enrolled in community colleges or who live off-campus, receive scholarships, grants, and student loans that are for more than the cost of their tuition. These funds help them pay rent, get to and from school, and cover other costs, like textbooks. Many schools work with third-party financial companies to disburse these funds directly to students. Consumers should remember the following:

• You can’t be required to use a specific bank or card. There may be a financial institution that operates on your campus, but you generally can’t be required to use a specific account or card to access your student aid. If you have received a federal student loan, your school must provide a paper check or cash option.
• Consider choosing an account before arriving at school. Shop around, and don’t feel limited by the banks operating ATMs on or near campus. Some financial institutions don’t charge you for using any ATMs, and some will automatically reimburse you for fees charged for using an out-of-network ATM. Many institutions also provide a mobile phone app to remotely deposit paper checks.
• If your school offers it, sign up for direct deposit as soon as possible. If your school offers direct deposit, you may be able to provide the school with your account information in order to access your funds more quickly.

If you have a specific problem with your student checking account and need to resolve it, please file a complaint with CFPB. If you want to just share your experience with student checking accounts and debit cards, tell us your story and use the tag “financial aid.” We’ll also share what we learn with the Department of Education, who recently published a notice on this topic.

Ask CFPB if you have more questions about student checking account.

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At the Consumer Financial Protection Bureau, we are working to understand the impact of the recession on young consumers and to learn more about what increasing levels of student debt mean for the economy as a whole. But we also know that millions of borrowers are struggling and need help now.

Today, the Consumer Financial Protection Bureau has partnered with the U.S. Department of Education to release a new web tool for borrowers who have fallen behind on their student loan payments. Our tool should help borrowers understand their options, communicate effectively with their servicer or debt collector, and work to bring their loans out of default or delinquency. Addressing the problems of delinquency and default – problems too often ignored – provides these borrowers with opportunities to rebuild their credit, go back to school, or buy a home.

Check out the Student Loan Debt Collection Assistant.

Delinquency and default are an often-overlooked, but quickly growing, segment of the student loan market. Over a quarter of all student loan borrowers are at least one monthly payment behind. Millions of federal student loan borrowers have defaulted on their loans.

These borrowers, like so many other young Americans, were hit hard by the recession. The unemployment rate among young college graduates is more than twice the rate of their older counterparts. Of those who have found work, more than a third of college graduates under age 25 have taken jobs that do not require a college degree. These young adults will feel the impact of graduating into a recession for a decade or more – it will take 10 to 15 years for their salaries to catch up to those who had the benefit of graduating into a healthy job market.

Over the past decade, student debt has grown to an average of over $22,000 for graduates of public colleges and universities and over $28,000 for private school grads. That’s a 20% increase. A growing number of borrowers – greater than one in eight – have debts of $50,000 or more. For too many, this grim economic reality makes making each loan payment in-full and on-time a monthly struggle.

The consequences are serious and the stakes are high. Default can result in thousands of dollars in penalties and fees, damaged credit and can even get you hauled into court. This is a concern for young student loan borrowers, because, unlike virtually all other types of consumer debt, student loans generally cannot be discharged in bankruptcy. That can make a fresh start all but impossible.

For millions of federal student loan borrowers, curing default has an added benefit. A loan in default cannot qualify for income-based repayment, an alternative payment plan that can have a monthly “payment” as low as $0 for extremely low-income borrowers.

If you’ve fallen behind on your loans, check out our new web tool, available here on ConsumerFinance.gov and at the new StudentAid.gov, launched by the U.S. Department of Education earlier this week.

The CFPB is working on a number of fronts to help make the student loan market work better for consumers. Working with the Department of Education, the CFPB launched a Know Before You Owe project to solicit input on a “financial aid shopping sheet.” The initiative should help students understand the debt implications of their college choice. And the CFPB set up a student loan complaint system to help ensure that private student lenders and servicers are responsive to potential mistakes and problems that borrowers encounter.

Repaying student debt can be challenging; but, for millions of young Americans, college remains a great investment and the surest path to future financial security. By knowing your rights and options, you can take control of your student loans and get back on track – it may be easier than you think.

For many students and parents, figuring out how to pay for college can be complicated and confusing. The decision to borrow for college should be the best investment a student will ever make.

But before the financial crisis, some families took on mortgages they didn’t fully understand and are now struggling to make ends meet and save their homes. While less talked about, many student loan borrowers also used products outside of the federal student loan program that they might not have fully understood.

What we’ve heard

Making sure that borrowers have clear information to make the best possible choice is critical. But borrowers have told us they didn’t know that private student loans don’t always have the same repayment options as federal student loans. These options allow borrowers to cap their payments as a portion of their income – a valuable option when times are rough. In addition, private student loan borrowers generally have fewer options in the bankruptcy process, compared to credit cards and other consumer loans.

But like borrowers struggling to stay afloat on their mortgages, private student loan borrowers have told us that they too need assistance. This past winter, we put out a request for information to find out more about their experiences.

Today, the Consumer Financial Protection Bureau published nearly 2,000 comments we received in response to that request. The comments include stories from individual borrowers, parents, school officials, and others.

One theme clearly rose to the top. Many private student loan borrowers expressed confusion and frustration when paying back their loans, especially when trying to get on an affordable payment plan.

One woman told us about the $90,000 debt she incurred to get a degree. Like other students who graduated in the middle of the financial crisis, she struggled to find a job to make ends meet. Interest and fees have led her debt to balloon to over $120,000. She said she’s been unable to get a new payment plan, and her loan has been sent to a debt collector. She worries that that the American Dream is out of reach.

This was just one of many stories of borrowers struggling to make ends meet.

Getting help

Fortunately, many of these borrowers are making use of the CFPB’s new student loan complaint system, launched a few months ago. Borrowers across the country have shared stories and submitted complaints about the process of obtaining or paying back a student loan.

These submissions have touched every stage in the lifecycle of a private student loan—from marketing and origination through repayment and servicing to default, bankruptcy and debt collection. Not surprisingly, we heard a lot about the challenges borrowers have faced in periods of unemployment and financial hardship.

Many borrowers submitting complaints to the CFPB have gotten some good news from their lenders, who have corrected billing problems and informed their customers about options for enrolling in an affordable payment plan.

Cracks in the system

The Dodd-Frank Wall Street Reform and Consumer Protection Act also requires the Bureau to analyze private student loan borrower complaints and offer recommendations to the Treasury Secretary, Education Secretary, and Congress.

To help us get a more complete picture of the private student loan borrower issues, today we issued a notice in the Federal Register and wrote to state attorneys general, schools, and advocacy groups such as Queens Legal Services – who is here today – seeking information about the complaints they hear. Once we figure out all of the cracks in the system, we’ll work with our government partners, industry, and schools to address them. Already, our new consumer agency has been working with the Department of Education to make sure students know before they owe.

You or someone you know might feel that changes to the system won’t help if you’re struggling today. Based on the comments we published today, you are not alone. Visit our website where you can use our student debt repayment assistant, file a complaint, or just tell your story.

With your first-hand knowledge of how the market impacts consumers, you’ll be able to help us understand how to help the next generation of students make smart student loan choices and make sure that their college education truly is a path to a better life.

Rohit Chopra is the CFPB’s student loan ombudsman. This post is excerpted from prepared remarks for a town hall on student debt in Queens, New York, hosted by Rep. Gregory Meeks.

A few weeks ago, the CFPB released an early prototype of a new tool to help students and families make smarter choices about financing college.

The CFPB recognizes that we can develop better products and policy with the help of the public. Already, we’ve heard from so many participants about what’s working well and what we should tweak.

On May 17th, we will be closing the first round of beta testing and will start analyzing your feedback. This will help our designers, developers, and experts on the team to determine where we need more testing and input. We’ll be sure to share our findings from the feedback on this blog.

Learn more about CFPB projects for students

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Our goal is for students and families to have an even more useful interactive tool for next year’s financial aid season to help them make one of the most important decisions of their financial lives. To get updates on this initiative and other projects for students, subscribe here.

Like all of our Know Before You Owe projects, your feedback is critical. If you haven’t had a chance yet, take a few minutes and chime in on what you think about our beta version today!

Tomorrow, April 27th, I will join the President and First Lady at Fort Stewart, Georgia, where he will sign an Executive Order directing the Departments of Education, Defense, and Veterans Affairs, in consultation with the Consumer Financial Protection Bureau (CFPB), to take steps to ensure that servicemembers, veterans and their families can get the information they need about the schools where they spend their education benefits. His directive also strengthens oversight and accountability of the schools that offer educational programs to the military.

I applaud this effort to see that servicemembers, veterans, and their families get the most “bang for their buck” when they use their educational benefits. During the past year I’ve traveled to military installations in 15 states and spoken to active-duty, National Guard, and Reserve military members and their families. I’ve also met with veterans and their families, as well as those who advocate for them. One issue that has come up repeatedly in my conversations with them is the challenge of making an informed decision on where to use GI Bill and Military Tuition Assistance benefits. How do they find a quality school that will charge them a fair price, provide adequate support, and set them up for success after graduation without a mountain of student loan debt holding them back?

Too often the schools being selected are for-profit institutions more notable for their slick marketing than for their academic credentials and sound value, much less the gainful employment history of their graduates. Here are just a few stories I’ve heard on my travels:

• An active-duty military spouse at Fort Campbell, Kentucky, was under the impression she was attending a “military-affiliated college” (she wasn’t; it was a for-profit school with no official military status). After she filled out an interest form she was called 10-15 times a day until she enrolled. When she had trouble logging on to her online class, she couldn’t get anyone from the college to help her. She failed the class due to lack of access but was charged the full fee.
• National Guard education officers in Ohio and North Carolina told me they are besieged by for-profit colleges desiring access to the troops. They noted that if they hold a job fair, over half the tables may be for-profit colleges, and that servicemembers may see a school’s presence at a job fair as an implied promise that you will get a job if you graduate from that school.
• A veteran at a forum I attended in Chicago, Illinois, had used up her benefits and incurred $100,000 in student loan debt for Bachelor’s and Master’s degrees from a for-profit college, but was unable to find an employer who was interested in her degrees. She was still working at the same job she had before she went to college.

The CFPB has been working on military education issues. This month at ConsumerFinance.gov we began testing a new online tool, the Financial Aid Comparison Shopper, which includes a military benefits calculator, to help people compare options at different colleges, as well as see graduation and retention rates. We have set up a student loan complaint system, and my office reviews all complaints from servicemembers, veterans, and their families. And we’ve been coordinating with the Federal Trade Commission and the Departments of Justice, Education, Veterans Affairs, and Defense on military education issues.

It’s in everyone’s interest to see that military education dollars are well-spent. If they are, they will provide our country with educated veterans and family members who, like the World War II generation before them, can become the engine that drives our economy forward.

Holly Petraeus leads the Office of Servicemember Affairs at the Consumer Financial Protection Bureau. Last year, she wrote about the incentives that lead for-profit colleges to see servicemembers as “nothing more than dollar signs in uniforms.”

Learn more about the Know Before You Owe project for student loans.