Should your school be a financial services provider? It's no longer enough to provide an education; many schools now provide credit, banking services, even insurance protection. But are financial service partnerships sweet deals for schools, or more trouble than they're worth?

University Business, Jan, 2003 by Elizabeth Gardner

Irresistible features. Both Sutton and Bancorp offer similar attractive features: low or no-fee accounts, free online bill payment (a perk that usually costs $4.95 per month and up), interest on checking accounts, and reimbursement for fees incurred at other banks' ATMs. "The account holders win just by going with us," Kelly declares. So far, AJDrexelbank.com has attracted 50 to 60 percent of each incoming class at Drexel--just about the maximum possible, considering that 30 percent of the students commute, and so may already have local bank affiliations. Another plus: Parents have opened accounts so that via online transfers they can quickly move funds to their children.

Win/Win. Both banks expect to reap additional business, either from their account holders as they move into the prime ages for auto and home loans, or from the universities themselves as they venture into tuition bill presentation (enabling transfer of payments electronically). The school's main obligation is to help the bank brand the Web site and provide appropriate links from its own site. And those links go both ways, Kelly notes: The bank can place school event reminders on its site, or even install a fundraising box that says "click here" to donate $5 or $10 to the school.

You're in Good Hands

On the indemnity side, life insurance is the type of coverage most commonly offered through alumni associations. Such programs can be lucrative for IHEs--but generally only if the program has been in place long enough to attract a critical mass of participants. According to Meyer, a school may receive a straight percentage of annual premiums (typically, 5 percent), or a "dividend"--a percentage of the difference between premiums paid in and benefits paid out. The latter is usually a larger sum, but Meyer points out that associations may prefer a fixed percentage that they can include with confidence in their budgets.

Life insurance. Alumni association life insurance is no longer the unique benefit that it was when the only other inexpensive option was coverage through employers. Today, countless professional associations offer group term-life plans, and the Internet has even made it easier for individuals to find inexpensive premiums. But an alumni association may be able to advance sales on policies, based on its track record of finding reliable insurer-partners.

According to Keith Brant, executive director of the UCLA Alumni Association, "A person comparing rates can find a better deal on insurance, but alumni look for us to have done our homework," It's the association's job to make certain its insurance partner is solvent and has good customer service, he explains.

But, says Meyer, schools should know that unlike an employer-paid group-benefit scenario, being an alum doesn't guarantee acceptance into a program. That depends on which criteria the insurance company use to decide whether it will insure them, and how much the premiums will be. What's more, adds Meyer, the carrier's underwriting standards may be loose (requiring only such feedback as smoker and nonsmoker identification), it may be tight (requiring a full physical examination), or it may fall somewhere in-between. "But you can't have a relaxed underwriting policy and low premiums for those covered, along with high percentages back to the schools. You have to give a little on all three, or a lot on one."