According to a new report in the Denver Post, many universities will sell credit card companies access to lists of contact information for students, alumni, faculty and boosters in exchange for millions of dollars. Some schools even get a percentage of every dollar of credit card debt people carrying their branded cards take on, or for every transaction they make.
Among the contracts the Denver Post examined, it found many different types of agreements, all designed to lure students into taking on credit card debt or opening other accounts with the lenders.
"Young people are the future. If a bank can get them at the beginning, it's long-term marketing," Gale Hillebrand, chief counsel at Consumers Union, told the newspaper. "The debt treadmill is designed to generate revenue for years."
The more common provisions of these agreements can also see the institute of higher learning making over half a million dollars a year, plus bonuses, based on the number of credit cards opened by people in the databases the school sold. The paper said these contracts also may allow the lender to place advertisements at school sporting events.
The Post also said lenders will pay hundreds of dollars for an ATM to be strategically placed on campus. In addition, some will allow debit cards to be tied to student ID numbers. In some cases, these contracts can be worth millions to both the school and banks.
The newspaper reported that many students will accept offers marketed on their campus because it's easier than shopping for the best deal or interest rate for credit card debt.
The average college student graduates with several thousand dollars worth of credit card debt spread across a number of accounts. However, thanks to provisions in the Credit Card Accountability, Responsibility and Disclosure Act, lenders are prohibited from trying to entice people under 21 into signing up for an account with promotional items like T-shirts or coffee mugs. In addition, young people will also need someone else to co-sign on their credit card, or otherwise prove they are financially able to make payments, before they will be allowed to open an account.