Higher One

Original: February 8, 2011 Issue 10

By: Mafao Nelly

Contributing Writer


Loan payment solutions at a price

Montgomery College students should be well informed before activating any card offered for financial aid and loan refund disbursement. One company known to have been offering these cards is Higher One.

Higher One is a company that provides disbursement and payment solutions for higher educational institutions and their students. Students are a profitable target market segment for Higher One according to Higher One’s prospectus last June.

Be careful when choosing the options for your financial aid and loan refund because you will be informed about convenient features of prepaid cards and their benefits without being told about their actual cost to you.

Statistics from 2009 in June 2010 prospectus for Higher One shows that the number of students with a Higher One account grew from 400,000 in 2007 to 1.2 million students in 2009.

Higher One’s net income grew at a rate of about 62 percent in 3 years.

Most of their profits came from fees they charge to students and merchants as the prospectus says “We generate revenue primarily from fees we charge for the transactions that we facilitate for our higher educational institution clients and our banking customers.”

Recent complaints about such fees as $19/month to students with nine month inactive accounts, 50 cent fees for using PIN instead of signature while using their debit card to make a purchase, and also a $2.50 fee for using other banks ATM, all attracted media attention.

According to a Washington Post article, these cards are loan cards and not credit cards

On higherone.com, information about Higher One, provided by Miles Lasater who is one of this company’s co-founders, shows that the founders of Higher One studied their market as students.

Looking at refunds processed at their school, they knew what service students wanted and what to offer before starting the company in 2000.

They equally say Higher One is a company ‘by students for students’ and their offerings will help students to quickly, safely and conveniently get access to their loan and financial aid reimbursement.

They explain that the money left over in financial aid and loans after all tuition and fees are deducted, can be deposited in to a Higher One account for a refund but before then students are issued a debit card to use for this money instead of waiting so long for a check refund.

Higher One’s marketing strategies and tactics to get to students are working well, according to the Student Lending Analytic Blog.

Higher One signs contracts with higher educational institutions. They work with the administrators to communicate the benefits of their products to their students through a school’s branded communication and literature. In some schools like Southern Oregon University, they send information to parents and students after admissions and during orientation.

They place signs in strategic campus areas and some schools like the University of New York have these cards related to their students ID cards. According to higher One’s prospectus, the reason why school administrators are likely to sign contracts is because; When Higher One offers the service of student loans and financial aid-reimbursement, it reduces the cost of the same transactions for the administrators.

They are not subject to the sweeping reforms passed in 2009 on credit cards and so are getting student’s money through high fees without being subject to law.
Although some students and the media have tried to expose Higher One profit making secrets, they are still getting contracts with educational institutions, getting students to sign up accounts and making money from these students.

This growing business is attracting competition as Ylan Q Mui, staff writer at Washington Post in an article says that Citigroup is projecting to start issuing prepaid cards for similar business by spring semester with City University of New York.

So as a student of Montgomery College, watch out for any card proposal and know the fees that come with the benefit.