New Federal Rules Encourage Adoption of Electronic Student Refund Systems: The U.S. Department of Education Recently Issued Rules Designed to Encourage Colleges and Universities to Disburse Student Refunds Electronically. Higher One's Casey M. McGuane, Senior Vice President for Client Operations, Provides Answers to Frequently Asked Questions about Those New Regulations

Article excerpt

[ILLUSTRATION OMITTED]

What's the backdrop to these new rules?

Electronic payments are certainly not new. In fact, colleges and universities have been using electronic systems for payroll and vendor payments and other purposes for years. But one area that has lagged behind is student refunds. By and large, refunds are commonly issued as paper checks, which of course is a costly and inefficient payment method.

What is the Department of Education trying to accomplish with these new rules?

The Department of Education is trying to provide clear procedures and guidance for colleges and universities to make the best decision on how to deliver refunds to students. The department is also communicating to institutions that it is encouraging electronic delivery of refunds to improve efficiency and speed.

The regulations also address the use of bank debit cards, correct?

Yes. Prior to this there had not been clear regulations on how to use bank debit cards for refunds. More and more campuses are using bank debit cards and stored value cards for refund delivery, as compared to the much older method of paper checks.

Are there any possible trip points here that stakeholders at colleges and universities need to be careful of?

The key issue is compliance with all aspects of the regulations. For instance, if you're using a bank debit card or stored value program, the associated accounts must be FDIC insured. There are probably six or seven similar key requirements on using bank debit card programs for refund disbursements.

What are some of those other requirements?

There can be no cost to the student to open the associated bank account or receive the first bank debit card. Another requirement is convenient and free access to an ATM machine. A third provision is that the card cannot be limited to particular vendors; it must be widely accepted. A fourth requirement is that refunds cannot be provided via a credit card or credit product.

How should campuses respond to these regulations? …