Sallie Mae announced that it will begin offering no-fee student checking accounts into which colleges and universities can directly disburse financial aid and tuition refunds owed to students.
The FDIC-insured checking accounts will be offered through Sallie Mae Bank and allow student account holders to withdraw cash from ATMs surcharge-free by using a Sallie Mae debit MasterCard. Other account features will include full online access, refund disbursement tracking, bill pay, check writing, transfers and links to other bank accounts. Minimum account balances will not be required and fees will not be charged for inactivity, low balances or PIN and signature transactions.
The checking accounts will be available to college and university students beginning in summer 2011 and are a part of Sallie Mae’s Campus Solutions product suite, which includes student loans, tuition refund disbursement, tuition payment plans and electronic billing and payment processing.
"With this product, Sallie Mae offers students the lowest cost checking account in the country, and students have near immediate access to their refunds," Sallie Mae Corporate Communications Director Debby Hohler said.
The no-fee student checking account is Sallie Mae’s first checking product, but the company got into retail banking in March 2010 with the launch of its high-yield online savings accounts and certificates of deposit.
Sallie Mae’s entrance into retail banking raises questions about whether the financial services company should be considered a credit union competitor, but Hohler said since the student checking account product is offered through schools, it wouldn’t compete with student checking accounts available directly from credit unions.
"The way that it works is the school has to sign up with us and then they choose to offer the product to their students, so it’s more of a B2B2C versus competing with credit unions," she said.
Sallie Mae’s savings products follow an online model and are not full-service accounts; therefore, their primary competitors are other online savings products such as those offered by ING Direct, Hohler said.
Brad Beal, the president and CEO of Nevada Federal Credit Union, said while he is not particularly familiar with Sallie Mae’s retail banking products, he thinks any financial services company that offers a high-yield deposit account would be a credit union competitor, but "only one of the many competitors out there."
American Credit Union Mortgage Association President Bob Dorsa said his initial feeling is that Sallie Mae "is not a huge threat for credit unions."
"I contend credit unions still face stiff competition from major and regional banks and other investment products and services such as mutual funds and annuities," Dorsa said. "The fact that most credit unions are experiencing weak loan demand also contributes to my assumption that they are not in need of more surplus deposits anyway."