Banks Pay Royalties To Colleges For Students Who Rack Up Credit Card Debt

[Huffpo] The schools and their alumni associations are entitled to receive payments that multiply as students use their cards. Some colleges can receive bonuses when students incur debt. The little-known agreements have enriched schools and some banks at a time when young women and men already are borrowing at record levels, raising questions about whether such collegiate and corporate alliances are in the best interests of students.

"The fact that schools are getting paid for students to rack up debt is a disgrace," said congressman Patrick Murphy, a Pennsylvania Democrat and former professor at the U.S. Military Academy at West Point. He said that banks' payments to schools amount to "kickbacks."

Huffpost found that affinity agreements involving some of the nation's largest and most prestigious colleges revealed, among many other perks, schools and alumni associations:

• Earn royalties: Banks typically pay schools $1 for each student who keeps a credit card open for 90 days. When students carry a balance, some schools can collect up to $3 more per card. Most of the schools are entitled to earn more whenever a student carries a balance from year to year.
• Cash in each time a student uses plastic: Many schools are entitled to receive 0.4 percent of all retailpurchases made with student cards. 
• Benefit from marketing incentives: When a university or alumni association agrees to market cards to students itself, the payoff is greater -- sometimes up to $60 for each card opened through a school's own marketing.  
• Offer special perks: Banks sometimes gain special access to athletic events. Cornell University must provide Chase Bank with tickets and "priority" parking passes at football, basketball, hockey and lacrosse games.

And, you wonder why are children are graduating with massive debt loads.

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