Iowa universities market, benefit from school credit cards

DES MOINES Iowa

Iowa’s two biggest public universities are helping to market credit cards to their students, an arrangement that generates millions of dollars for the schools’ alumni organizations.

Both the University of Iowa and Iowa State University have signed deals with their privately run alumni associations in which they agree to promote Bank of America credit cards marketed directly to students, the Des Moines Register reported in a copyright story.

According to records obtained the Register, University of Iowa officials have also agreed to give the bank access to databases that include the mailing addresses, telephone numbers and e-mail addresses of students, parents and people who buy tickets to Hawkeye football and basketball games.

The school has also pledged to give the biggest-spending cardholders special access to university facilities, coaches and even student athletes.

Such practices are a part of a widespread trend among colleges and universities nationwide to form partnerships with for-profit lenders.

In Iowa, and many other states, the financial details of the partnerships are not publicized, despite the involvement of publicly funded universities.

Nationally, some have expressed concerns about these relationships.

“We’re very concerned about these exclusive contracts that provide kickbacks to the universities,” said Ed Mierzwinski of the Public Interest Research Group. “We want colleges to be responsive to their students.”

Officials with the universities and their alumni associations say the relationships generate millions of dollars that benefit the schools and their students. They also say they’ve been forthright about their involvement.

“Whether you say ‘kickbacks’ or you say ‘royalties,’ we’ve been upfront with our constituency, and we share with them how we’re using those dollars,” said Jeff Johnson, president of the Iowa State University Alumni Association. “We have a commitment to student leadership and student scholarship.”

University of Iowa officials said there were 208 students currently using school credit cards, and that the average balance is $1,028. At Iowa State University, officials said 289 students were actively using the cards, with an average balance of $389.

“Most of our students arrive on campus already carrying a credit card,” Johnson, of Iowa State, said.

Relationships with lenders have offered lucrative incentives to alumni groups. University of Iowa alumni officials declined to say how much they are paid through their arrangement with Bank of America, as did bank officials.

But federal records show the University of Iowa Alumni Association was collecting $550,000 per year from MBNA, now Bank of America, through 2005.

Under the terms of the alumni association’s newest contract, the school itself is guaranteed at least $200,000 per year from the bank all of which is to go to the athletics department.

The Iowa State University Alumni Association stands to collect at least $500,000 annually from Bank of America through 2012, documents show. Under that deal, the school receives an annual guarantee of $40,000 to $42,000, which goes to the athletics department.

The University of Northern Iowa Alumni Association refused to make public its contract with Bank of America, but its president, Mark Jastorff, said there have not been any association-endorsed solicitations aimed at students, directly or indirectly, over the past six months.

“We do not do that,” he said. “Credit woes are a serious issue, and they affect students as much as anyone else.”

Information from: The Des Moines Register, http://www.desmoinesregister.com

–Associated Press



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