Universities Make a Profit from Student Credit Cards - Total Bankruptcy
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Universities Make a Profit from Student Credit Cards

While universities make their reputations as institutions that teach and nurture young people, there is a practice that has some people questioning whose best interest the universities have in mind.

According to the San Francisco Chronicle, universities are making millions of dollars by selling names and addresses of their students and alumni to credit card companies, and giving credit card companies privileged access to events that take place at these schools.

In exchange for providing this access and information to the highly influential demographic being targeted by credit card companies, universities often receive royalty payments. Often these payments increase as the students themselves use the cards more. Some colleges, the report says, may even get bonuses when students whose information they have provided go into debt.

These agreements, called affinity agreements, are not well publicized. Student-aged citizens are borrowing money at historic rates today, and publicizing such agreements would likely raise questions about the relationship between corporate entities like credit card companies, and the universities that are making deals with them.

President Obama’s recent credit card legislation has made some inroads into these tactics on campus by forcing credit card companies to limit their marketing efforts on college campuses. However, there is not any legislation in place that prevents the affinity agreements from happening.

There is, however, a new law that requires credit card companies and universities to disclose the nature of their affinity agreements. According to the San Francisco Chronicle, however, few schools have published their contracts in an accessible way, like online, or publicized the fact that the agreements exist. It is not known how many colleges and universities currently have an affinity agreement with a credit card company.

Congressman Patrick Murphy of Pennsylvania is the author of the laws that force information about the affinity agreements out into the open, and is upset about colleges working with companies to drive students into credit card debt. He told the California publication:“The fact that schools are getting paid for students to rack up debt is a disgrace."

Bank of America is a major player in the affinity agreement market. According to BofA, it has agreements in place with around 700 schools and alumni associations across the country. The Chronicle article says that 100 or more other schools are thought to have agreements as well.

The article reviewed some affinity agreements. All of the agreements that they looked at give banks and credit card companies access to students’ names, phone numbers and addresses. Others provide access to special events like football games, where they can set up booths to market to students.

These contracts call for minimum payments by banks to the schools and alumni associations in question. For example, Bank of America agreed to pay Brown University $2.3 million over seven years, and it agreed to pay the University of Michigan $25.5 million over eleven years.

In defense of these agreements, Bank of America reps said that rather than taking advantage of students, they are trying to build long-term banking relationships with potential customers. Colleges and universities, meanwhile, say that they are using the money earned for grants and scholarships that go to students. Still, many students have a tough time finding work after graduation and have building student loans and credit card debt, which could eventually drive them to bankruptcy.

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