Federal Student Aid (FSA), an office of the US Department of Education, is set to launch a new payment card programme pilot for current, in-college students receiving refunds of the agency’s loans throughout the year.
Intended to be distinct from the current credit, debit or prepaid cards, the new FSA card will hold the extra loan money that is not utilised for the students’ tuition.
Currently, overage FSA loan money is refunded to the student through various ways such as cards, ACH, manual checks and cash disbursements. The purpose of the pilot is to test if the new FSA Payment Card could provide consistent, economically advantageous and timely refunds of these loans.
Amount on the card can be used by the students for various expenses such as books, food and rent.
While the FSA expects the card to be a cost-efficient approach, certain senators expressed concerns over the poor history of such card programmes that might make students and taxpayers vulnerable to exploitation.
Senators Dick Durbin, Elizabeth Warren, Jack Reed, Richard Blumenthal and Sherrod Brown penned a letter to FSA chief operating officer Dr Wayne Johnson seeking detailed information about the pilot.
The letter read: “While we support efforts to improve the financial aid distribution process, we have serious concerns about your proposal given the poor track record of such cards in the past.
“History shows that in the absence of strict oversight and safeguards, these card programmes can leave students and taxpayers vulnerable to exploitation.
“Congress must be fully informed about how your proposed pilot programme would impact our nation’s 42 million student borrowers and federal student aid programmes.”