July has been a busy month for the PayCard industry, with the Department of Education and the State of New York Department of Labor both addressing rule making proposals!
The Department of Education is addressing a rule change regarding the disbursement of Title IV Funds. These funds include all federal grants, loans and financial assistance for college students. Universities and colleges are tasked with the responsibility of applying the funds to tuition and fees for each student as well as disbursing any remaining or additional funds to said student. The debate currently being addressed is determining the most efficient and cost effective way to get the funds to the students.
Brad Fauss, the President and CEO of the Network Branded Prepaid Card Association (NBPCA), has a unique insight into the benefits of using prepaid cards as a solution to the distribution-of-funds problem. In his Op-Ed piece, published July 1, 2015 in The Hill, he examines the effect the evolving financial industry has had on students’ access to banking options. The financial industry’s evolution has moved past traditional brick and mortar banks and, now, better suits a digitally-driven economy. Allowing for instant access to funds, and ease of use through tools such as mobile apps1, 2 the financial industry is better-meeting the needs of students and parents alike. Many students and parents today opt to receive Title IV funds through a prepaid card offered in conjunction with a college or university. These cards are convenient for students because they can be used to buy books, meals or other needs wherever Debit MasterCard or Visa debit cards are accepted. Parents can monitor students’ spending through the cards and also load additional funds when, and as soon as, they are needed.
Fauss explores the potential effect this rule change would have on both students as well as colleges and universities. He finds that students currently represent a large population of the underbanked and unbanked and the issuance of paper checks for Title IV Funds could cost them both time, as they seek out a check cashing option, and money as they face service fees from banks and check cashing services.
There are many potential benefits for colleges and universities from implementing financial distribution of Title IV Funds on prepaid cards. Per the U.S. Department of Treasury, the cost to issue a paper check is over $1, but electronic disbursements cost only about 10 cents. This could be a potential savings of $11.3 million in the first quarter of 2015 for Title IV funds, alone.
The State of New York – Department of Labor has yet to make a decision regarding their proposed payroll card regulations and have extended the period in which constituents can comment on the rule online. On July 1st their website posted the following notice: “Legal Updates: On May 27, 2015, a Notice of Proposed Rulemaking regarding Methods of Payment of Wages was published in the New York State Register. The State Register contains copies of all of the rulemaking documents, and the full text of the proposed rule. The 45-day comment period for the proposed rule has been extended, by the Department, to July 31, 2015. Comments may be submitted to Michael Paglialonga, NYS Department of Labor, Building 12, State Office Campus, Room 509, Albany, NY 12240, email: email@example.com.”
1Our mobile app – rapid!Access can be downloaded at no cost from the Apple and Android Stores. Keyword search “rapid paycard”.
2While rapid! PayCard does not charge for this feature and service, standard text messaging, data and cellular rates may apply. Please check with your cell phone carrier and inquire about fees your carrier may associate with these services.
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