Mobilizing Student Loan Disbursements

Roughly 19 million college and university students are loading up their cars and heading back to campus for another school year, according to data from the National Center for Education Statistics. Approximately 70 percent will graduate with a significant amount of student loan debt, too, as they received $107 billion in loans during the past school year.

Modern college students are typically connected and digitally savvy. Many still receive their loan funds via check or other legacy methods, however, delaying the tuition payment process, hindering their ability to buy textbooks or supplies, and giving lenders little insight into — or control over — how that money is spent. The latter could potentially lead students to spend funds more frivolously.

New and innovative disbursement methods are bringing change to the industry, though. Some lenders are turning to reloadable debit cards and other disbursement tools to both provide more direct loan fund access and retain greater transparency. Others are looking to additional solutions to solve student lending problems.

Digital banking platform BankMobile, a subsidiary of Customers Bank, has announced a new partnership with 36 U.S. colleges and universities, for example. It is now offering more than 500,000 student loan customers access to its BankMobile Disbursements tools and Vibe checking accounts, and nearly 90 percent of its customers at the University of Texas, the University of Arkansas and 34 others have elected to receive mobile disbursements.

In a recent interview, Andrew Crawford, head of BankMobile’s disbursements business, claimed the partnership would give students a more convenient way to manage their loan funds and tuition payments.

“Paper checks are terrible for students,” he said. “You have to wait forever for the school to mail it to you and for it to arrive. Then, once the student gets it, if they have a bank account, they have to go deposit it and wait for it to clear — or, if they don’t have a bank account or branch or ATM nearby … they’ve got to wait even longer. Electronic delivery is safer, and it really speeds up the process.”

Student Loans Go Mobile

BankMobile’s offering deposits student loan funds directly into existing checking or BankMobile Vibe checking accounts, which customers can open when signing up for loans. They can then spend those funds on tuition, textbooks or other expenses, and even use 55,000 fee-free AllPoint ATMs to make deposits, transfers and withdrawals.

The digital banking platform chose to offer mobile disbursements and a smartphone app-accessible checking account to reach young college-going consumers, 75 percent of whom use mobile banking apps, according to recent research. More than 60 percent of Americans regularly use mobile banking apps, a figure largely driven by the 75 percent of consumers aged 18 to 34.

“We are all digital,” Crawford said. “We really don’t see a demand for people asking for branch banking. They’re using digital payments, putting cards into digital wallets and using peer-to-peer [P2P] systems instead.”

These features and others were designed not only to offer a simplified solution, but to help students manage their finances.

“Most middle- and low-income Americans, which college students certainly qualify as, have pretty poor access to quality financial products and services,” he added. “So, another huge pillar of our program is financial literacy. We have a lot of programs we try to provide — to both students and schools — to teach them more about how to manage their money.”

The Future Of Student Loans

Paper checks and legacy disbursement methods aren’t just plagued by lack of transparency and speed, Crawford noted, but are often less secure than mobile disbursements or other payment methods. In addition, they do not offer the same tools and capabilities presented by digital solutions.

He expects more student lending companies to power disbursements and loan payments with mobile technology going forward. This will likely be further pushed in the future, as smartphones and other mobile devices become more advanced and play larger roles in consumers’ lives — particularly those of younger consumers.

“One of the big trends we see [is] customers continuing to go digital,” Crawford said. “When we started, I’d say that roughly two thirds of our partners offered paper checks. Now, I’d say it’s down to one third. Those that stop offering it often find that the demand that they thought was there was mostly in their heads.”

If his predictions prove accurate, it may not be long before the millions of students returning to campus are paying for classes, room and board with a few taps on their mobile phones.