The U.S. Department of Education (ED) acknowledges this trend. According to ED, “Institutions are increasingly changing the way they disburse funds to students by moving away from issuing checks to transferring funds electronically.” Refund management is the easiest way for an institution to help students receive their money electronically while still allowing for the option to receive a paper check if the student desires.

The ED states: “In response to this trend, several companies are offering services that include: “Obtaining the student’s authorization to perform electronic transfers; transferring the funds electronically to the student’s bank account; opening a bank account for the student, (and) issuing debit cards in conjunction with a participating bank.”

These are important components of a refund management service or streamlined disbursement process.

“Companies that contract with institutions to provide these types of services, in some instances, become third-party servicers,” adds the ED. “The regulations in 34 CFR 668.2 define a third-party servicer as an entity that contracts with an institution to administer any aspect of its Title IV programs. Thus, if an institution contracts with a company to perform activities that are the institution’s responsibilities under the Title IV programs, the company is a third-party servicer. In the contract between the institution and the servicer, both parties must agree to comply with all statutory and regulatory provisions governing the Title IV programs and agree to be jointly and severally liable for any violation by the servicer of these provisions …(A) third-party servicer must submit an annual audit of the activities it performs on behalf of the institution to the Department….”

As we enter 2006, we anticipate that the trend to use cards to streamline refunds will continue. With it’s sole focus on higher education, Higher One completed a third-party servicer audit prior to the release of the ED guidance. As institutions continue looking towards the use of cards to streamline refunds, the ED guidance, accompanied by several best practices, will be desired when it comes to refund management. Some best practices include:

• Third party servicer audit made available and completed by major firm.
• Three choices for refund receipt: immediate deposit to free checking account offered by provider, ACH to any other bank, check created and sent by the provider.
• Online payment preference management: student should have the opportunity to change or update his or her preference at any time by accessing his/her account online.
• Full exception handling: returned checks, ACH, or other exceptions are handled by the vendor.
• Full customer service: separate service for the student and administrator should be provided. Student service should include telephone support and online features like, ‘Where’s My Card’ and EasyHelp.
• Administrative reports developed specifically for refund management should be available for audit control and reporting.
• An administrative web site should provide the ability to process online refund reversals.

These features are all part of Higher One’s OneDisburse service, and contribute to the success of the service. They also contribute to increased student satisfaction with the payment experience. In 2005 more than 70,000 students chose to start using Higher One’s OneAccount. At clients where the service has been running at least one year, the average adoption of the account approached two in three students. Satisfaction with the features of the card, the account, and ability to get refunds quickly was more than 90%.

With student satisfaction high and the trend of using a card-based refund management program continuing, Higher One is looking forward to another exciting year. In 2005 we doubled our number of college and university partners, and passed the milestone of helping our clients make $1 billion in payments. What’s to follow in 2006? We don’t know the details, but we look forward to working with you on this exciting trend of using cards to improve student payments.

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