Colleges have gotten themselves in trouble recently by forming alliances with banks and other financial institutions. Banks used to give gifts to students who sign up for credit cards. Colleges used to be paid by lenders to steer students to certain loans.

The federal government changed its policies a number of years ago, disbursing financial aid only directly to the bursar's office, in the hope of eliminating possible abuses by financial institutions .

Now, however, many colleges are converting student ID cards into debit cards. Others are hiring outside financial institutions to take over the processing of financial aid. In some cases, these outside financial institutions are allowing students access to the financial aid without it passing directly to the school.

This allows the financial institutions to market add-on products, such as bank accounts, ATM/debit cards and credit cards with an appearance of an endorsement by the college and little (if any) competition. The fees are not readily apparent and student ID cards often carry the logo of the financial institution.The reality is that in the process of disbursing the financial aid to students, too much of it gets consumed by fees.

It is important to note how widespread these practices are. Participating colleges include many of the country's best-known in higher education and represent forty percent of college students. One example, highlighted in a report prepared by U.S. Public Interest Research Group Education Fund, is the

$25 million paid to The Ohio State University by Huntington Bank. Under the agreement, the bank is allowed to open branches and ATMs on campus and "exclusive access to directly offer tailored products and services to more than 600,000 students, faculty, staff and alumni".

While legal under revised laws, it is a process that is ripe for abuses.

As your children attend orientation and registration, many will see sign-up tables offering a free sweatshirt to anyone who signs up. Please make sure they are aware of these revised practices and are careful about the financial choices they make.

Joel Peck, CPA