Universities Raked In $83.5 Million From Deals With Credit Card Companies

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Over at CBS MoneyWatch, Lynn O’Shaughnessy takes sides on a new debate brewing amid new Federal Reserve reports that break down how universities encouraging students to apply for special student credit card accounts frequently enjoy substantial payouts for those sign-ups. O’Shaughnessy’s takeaway follows below.

Do university administrators feel guilty about encouraging their students to sign up for credit cards that Handful of cut-up credit cards.provided kickbacks to their schools?

Of course, these administrators should. Over the year, hundreds of colleges gave student credit card issuers amazing access in return for cold cash.

But she backs it up with hard fact: Last year, over 53,000 new credit card accounts were opened up largely due to these agreements between colleges and financial institutions. Credit card issuers paid out more than $83 million to unviersities and alumni associations because of deals like this. It is savvy marketing indeed: Identify a target demographic, most of who are enjoying independence away from home for the first time in their lives, lure them to open up a credit card–the “swipe now, pay later” mentality probably an eerily effective tagline to bait college students–and pay the university facilitating such a transaction a tidy fee for the long-term gain.

While the ethics here are sticky at best, the business practices of these universities are still legal–and in an age when education dollars continue to disappear, this practice of shilling out the very student population that keeps them in business is what will probably help towering universities persist beyond the recession.

You can browse the entirety of the Federal Reserve Board’s report here.