Shareholders of Higher One — an Elm City higher education financial services company founded by three Yalies in 2000 — voted last week to sell one of the two of three major divisions of their business.
The Munson Street company, which mediates online transactions between more than 9 million students and 1,500 campuses, sold the branches of its business that distribute financial-aid refunds to students and provide bank accounts for college students to Philadelphia’s Customers Bank, a company Higher One has partnered with since 2013, said Shoba Lemoine, Higher One vice president of corporate communications. Higher One chose to enter the sale in response to new government regulations that govern student bank account services, Lemoine added. Although Lemoine did not specify the regulation she referred to, the United States Department of Education released new regulations in October to protect students from unwarranted college loan fees. The Department of Education prohibited universities from requiring students to open a bank account and mandated that schools provide students with more options for receiving their financial aid.
“It became clear this acquisition made the most sense to preserve our proprietary business model so that colleges and universities and their students can continue to use these much-needed services for years to come,” Lemoine said.
Since at least 2012, Higher One has faced litigation from students and a Federal Deposit Insurance Corporation investigation for deceiving students into creating and paying additional fees on their student accounts. In December, Higher One settled a $31 million lawsuit with the FDIC for deceptive practices and last August, the Consumer Financial Protection Bureau also issued a website statement advising students to be wary of bank accounts operated by a university’s finance partner.
In the recent past, the CFPB, Do-ED and U.S. Public Interest Research Group — a coalition of nonprofit organizations — scrutinized higher education financial companies such as Higher One, said Pauline Abernathy ’88, vice president of the Institute for College Education and Success, a nonprofit that promotes college access and recommended that the Department of Education scrutinize Higher One services in a 2013 public letter to the federal Department of Education.
Lemoine said Higher One will continue to provide online tuition and retail transactions between universities and students.
Higher One’s recent sale is the latest development for the company, which was praised by then-Mayor John DeStefano and Governor Dannel Malloy during the March 2012 ribbon-cutting ceremony for its 150,000-square-foot offices in the Winchester factory building. Then, the company’s shares traded for roughly $15 — after a high of $21 per share in 2011. Shares traded for $3.72 at the close of business on Wednesday.
Lemoine added that the company, which employs 250 people across the state and 545 nationwide, does not have plans to relocate or cut employees. Higher One’s deal with Customers Bank will be finalized in the upcoming months and is likely to include a commitment by the bank to make job offers to the 200 Higher One employees who work in the purchased divisions, Lemoine said.
“Higher One has been a strong corporate citizen in New Haven for the last 15 years and we’d like to convey that, with this announcement between Higher One and Customers Bank, there are no plans to reduce staff or leave the New Haven area at this time,” Lemoine said.
For students whose universities hold contracts with Higher One, a company with a 1.7 star rating from 17 reviews on Google, the latest developments will hopefully bring an improvement in the company’s service.
Jamie Severino studied at St. Petersburg University in Florida and commented on Higher One’s Facebook President’s Day post to report a lag in service regarding tax returns. She said customer service is difficult to navigate and did not resolve her issue at all. Her sentiments reflect those of at least two dozen disgruntled customers who reported complaints on the company’s Facebook page in the past two months.
Correction, April 14: A previous version of this article incorrectly stated that the Institute for College Education and Success singled out Higher One’s services for criticism; in fact, the organization did not criticize Higher One, but recommended that the U.S. Department of Education be wary of Higher One services.