Every year, the U.S. Department of Education gives over $120 billion in federal grants, loans and work-study funds to more than 13 million college students, making it the largest provider of student financial aid in the country. Now, students may be given some of these funds on a debit card.
According to The Hill, the Department of Education plans to launch a pilot program which would place financial aid dollars onto debit cards for up to 100,000 students. Earlier this month the department began searching for a contractor to help with the program.
Currently, federal student loans and grants are distributed directly to the colleges and universities that aid recipients attend. If there is money left over after tuition is deducted, schools typically return these "refunds" to students in the form of checks or bank deposits to be used at their discretion.
Students are able to use their refunds on all kinds of expenses including textbooks, computers and food. For non-traditional students, the current system provides the flexibility to use the money to cover costs like rent, daycare and transportation.
Under the pilot program, these refunds would be directly distributed onto debit cards to be used for "everyday goods and services" and would be accompanied by a mobile application.
While this development may be a welcome step into the 21st century, many worry that the new system would allow the government to limit how students use their aid.
BuzzFeed News reports that this program would allow the department to closely monitor and potentially control how students use their federal student aid.
According to a notice posted in the federal register, the department would oversee how funds were being spent and "would possess the ability to restrict the types of products and services" that the funds could be used for."
"Any ability to restrict purchases or merchant access using Federal financial aid funds must be aligned with government approved use of funds," reads the program description.
Elizabeth Hill, spokesperson for the Department of Education tells BuzzFeed News that the government does not plan to "exercise" any controls on the spending of students' loan money.
Last year, however, Dr. A. Wayne Johnson, Former Chief Operating Officer of the Office of Federal Student Aid (FSA), indicated that the department would, in fact, maintain oversight of students' funds.
"We will have controls," he told Inside Higher Ed. On January 25th, Johnson was appointed head of the Department of Education's newly-formed Office of Strategy and Transformation and James Manning became the acting COO of the FSA.
"We are focused on bringing FSA into the 21st century," said Secretary Betsy DeVos in a statement. "Wayne has laid out a strong plan to make that happen."
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