U.S. banks paying colleges for students with credit card debt

American banks are allegedly funding colleges where students incur high credit card debt, a Huffington Post investigation found. Colleges are also selling student information to banks in what is known as an "affinity agreement."

Have you ever seen credit card companies marketing their services on college campuses? Then you might have witnessed an affinity agreement, whereby colleges and banks sign a deal to market credit cards to students. The Huffington Post Investigative Fund discovered an ugly side to these deals: post-secondary institutions are selling the names, addresses and other personal details of students and alumni to credit card companies while also profiting off student debt. Ben Protess and Jeannette Neumann wrote:

The schools and their alumni associations are entitled to receive payments that multiply as students use their cards. Some colleges can receive bonuses when students incur debt.

The article states it's unclear how many of the nation's 2,700 colleges have such affinity agreements, or how many allow credit card companies to market to students in addition to graduates. Bank of America admitted it has signed contracts with around 700 schools and alumni associations. Ed Mierzwinski, consumer program director for the federation of state Public Interest Research Groups, is quoted as saying, "Universities should place the welfare of their students as their highest priority and shouldn't sell them off for profit." The report found that 17 contracts from colleges and their alumni associations describe the special access offered to banks. They can set up booths at football games and implore colleges to provide students' names, phone numbers and addresses. Also, "many schools are entitled to receive 0.4 percent of all retail purchases made with student cards." Turning to the nation's largest bank, Bank of America often pays schools $1 for each student who opens a credit card account and keeps it open for 90 days, according to contracts reviewed by the online outlet's Investigative Fund. This investigation comes at a time when students are facing insurmountable debt. The Huffington Post quotes a figure from student lending company Sallie Mae: "College seniors graduated in 2008 with average credit card debt of more than $4,100, up from $2,900 four years earlier." According to Forbes, credit score company FICO sponsored a survey of 127 risk managers at U.S. firms and found 95 percent of respondents said "they expect interest rates to move higher or stay at their current (and historically high) levels." Some U.S. schools are not renewing affinity agreement contracts. The University of Albany recently stated it didn't renew a contract with a bank after it expired last spring. School spokesman Karl Luntta told the TimesUnion: "We feel it's in the best interest of students."