When you head to college, you’ll probably be concerned about the dorm you’ll live in, the friends you’ll make, and the classes you’ll take. You should add something else to the list: the bank you’ll use.

Many colleges have relationships with banks to manage financial aid for their students. After you open an account with the bank, the financial aid is then made available to you on a bank debit card or a prepaid card. According to the Government Accountability Office and the U.S. Public Interest Research Group, two out of every five college students attend a school that has such an agreement and nearly $25 billion dollars in Pell Grant and Direct Loan program funds are annually released to students at institutions using these accounts.

The relationship benefits banks and colleges in other ways as well. Last year, for example, the University of California at Berkeley forged a $17 million exclusive deal with Bank of the West. The bank is giving the university $17 million over 10 years, and the university is allowing the bank to provide on-campus ATMs, branch locations, and banking products and services aimed at the school community.

But that doesn’t mean the bank on campus is a good deal for students. A recent study by NerdWallet says that many banks on college campuses charge overdraft fees of about $35. While that amount is on par with the average overdraft fees banks charge all customers, it’s a charge college students can’t easily afford and are more likely to trigger.

About 40 percent of 18- to 25-year-olds pay at least one overdraft fee each year, compared with just 15 percent of those older than 62, according to the Consumer Financial Protection Bureau. A 2014 investigation by Consumers Union, the policy and mobilization arm of Consumer Reports, found that students could rack up to $250 per year in fees if they were to use campus-sponsored accounts as their sole or primary account.

For this reason, you might be better off opening an account at bank that does not charge such fees. Earlier this month, new Department of Education rules went into effect to make that easier. Consumers Union served on a special committee that developed these rules and they are designed to prevent colleges from recommending that students open accounts with specific banks in order to deposit financial aid. Instead, students will be able to freely choose how to receive their federal student aid refunds, and they will be given objective and neutral information about their financial-aid disbursement options.


Use Consumer Reports' Credit Card Adviser Comparison Tool to find the cash-back card that's best for you. And read our special report on the student debt crisis
 

How to Choose a Bank

NerdWallet’s research found that instead of choosing the bank that’s affiliated with a college, you're better off choosing a lower-fee bank and that there's usually within three miles of a college campus. 

Another option could be to open an account with an online bank. Simple, for example, could be a good fit for students because there are no overdraft or maintenance fees. If an account doesn’t have enough money to cover a transaction, the purchase is declined. A “safe to spend” alert on the bank’s app is designed to help students avoid that situation. The alert takes into account upcoming bills and suggests how much is available to spend.

Capital One 360 is another online-only account that doesn’t have overdraft fees.

Both of these banks belong to large networks of ATMs, so it’s likely that you will be able to find a nearby cash machine.

If you still want to sign up for a college-affiliated bank account, study the bank’s overdraft policies and monitor your account carefully so that you don’t trigger an overdraft fee. Some banks charge multiple overdraft fees in one day if you make successive purchases that drop an account below zero.

Be aware that overdraft fees can lead to other problems as well, such as getting turned down for a bank account in the future, says Devan Goldstein, a banking analyst for NerdWallet. Bank customers with frequent overdrafts might end up with a record in the ChexSystems, a database of consumer-banking behavior. Because banks check the database when consumers apply for accounts, an overdrawn college banking account can have an impact long after graduation.