As Student Credit Card Debt Rises, Banks Quietly Reward Schools

Some of the nation’s largest and most elite universities stand to gain millions of dollars from selling the names and addresses of students and alumni to credit card companies while granting the companies special access to school events, the Huffington Post Investigative Fund has found.

The schools and their alumni associations are entitled to receive payments that multiply as students use their cards. Some colleges can receive bonuses when students incur debt.

The little-known agreements have enriched schools and some banks at a time when young women and men already are borrowing at record levels, raising questions about whether such collegiate and corporate alliances are in the best interests of students.

“The fact that schools are getting paid for students to rack up debt is a disgrace,” said congressman Patrick Murphy, a Pennsylvania Democrat and former professor at the U.S. Military Academy at West Point. He said that banks’ payments to schools amount to “kickbacks.”

Key Findings

Our examination of affinity agreements involving some of the nation’s largest and most prestigious colleges revealed that schools and alumni associations:

Landmark credit card legislation signed by President Obama one year ago curbed some marketing tactics on campuses but didn’t prohibit the arrangements between colleges and banks, known as “affinity” agreements.

The substance of these deals had been secret. A provision in the law, authored by Murphy, requires their disclosure. But even now, few schools post the contracts online or publicize their existence. Obtaining a copy can take two weeks or more. 

Thus it’s unclear how many of the nation’s 2,700 four-year colleges have such agreements, or how many allow credit card companies to target students in addition to graduates. Bank of America, which dominates the market, said it has affinity contracts with some 700 schools and alumni associations, where marketing practices vary. At least 100 schools are believed to have affinity agreements with other financial institutions.

Seventeen contracts obtained by the Investigative Fund from schools and their alumni associations detail the special access granted to banks, such as allowing them to set up booths at football games. All of the agreements call for colleges to provide students’ names, phone numbers and addresses.

For granting such access and information, schools can receive royalty payments based on the number of students opening accounts and the amount they spend, the contracts show.

Most of the schools are entitled to earn more whenever a student carries a balance from year to year.

Some consumer advocates question whether colleges participating in affinity agreements are failing to safeguard the young people in their care.