PayPal, Consumer Groups Battle Over Company’s Credit Line for School Costs


  • Consumer advocacy groups say PayPal is marketing its high-interest credit lines to students as a way to pay educational expenses at unaccredited institutions. 
  • In an email, PayPal said it has no relationship with for-profit schools and is taking action against some that are advertising PayPal Credit in misleading ways.

PayPal is battling back after numerous customer advocacy groups mentioned the payment supplier for what they called “predatory monetary practices.”

In a joint letter to the Customer Financial Protection Bureau and Workplace of the Comptroller of the Currency, the customer groups, including the Trainee Customer Protection Center, Americans for Financial Reform, Student Financial Obligation Crisis, and Allied Development, said: “PayPal Credit is currently supplying its products as high-cost education funding alternatives that can leave debtors in substantial distress.”

PayPal Credit is the consumer loaning arm of PayPal and is used by Synchrony Bank. It is basically an unsecured credit line, which generally comes with a higher rate of interest than a regular charge card however, enables access to up to $20,000, depending on your creditworthiness. Presently, PayPal Credit has an interest rate of about 24%.

Trainees relying on monetary products like this to pay for classes or other education expenses are charged rates that far exceed the most expensive federal trainee loans, the letter said.

“It is more costly than many credit cards and private student loans,” stated Mark Kantrowitz, publisher of “Frankly, it is a predatory financial product.”

In fact, the rates of interest on federal trainee loans are at a record low, with undergraduate Stafford loans down to 2.75%. The rates on private student loans vary but can be as low as 3.5%– they are typically greater than federal trainee loans and charge greater fees. Credit card rates stand near 16%, on average.

The letter consisted of a list of more than 150 mainly unaccredited colleges and certificate programs that advertise PayPal Credit as a financing option for students. Numerous of these for-profit programs do not have access to federal student loans or personal trainee loans, according to the customer groups.

“We take the claims laid out in this letter extremely seriously,” PayPal spokesman Joseph Gallo stated in an e-mail.

“PayPal does not market PayPal Credit straight to for-profit universities or other associated entities and the business has no direct relationship with entities in concern relating to PayPal Credit,” he stated.

“While PayPal claims that it does not market it to for-profit colleges, they are taking advantage of the colleges’ usage of their item,” Kantrowitz stated.

With college costs on the increase, countless Americans are now strained by trainee debt; collectively, Americans owe more than $1.6 trillion.

At four-year private colleges, tuition and charges plus space and board averaged $ 49,870 in the 2019-20 school year; at four-year, in-state public colleges, it was $21,950, according to the College Board.

Pointing out issues raised in an earlier report by the Student Borrower Protection Center, tapping other kinds of credit and debit– beyond federal and private trainee loans– to cover instructional expenses is adding to a growing issue of “shadow student debt,” the consumer groups also stated.

“In the shadow of the student loan market sits a surprising web of credit and debt is taken on by trainees to spend for college,” the report specified. “This high-cost, high-risk monetary items are used to prop up predatory for-profit schools across the nation.”

“If a company is found to be using unreliable or misleading messaging or characterization about PayPal Credit products without our prior understanding or permission, we will quickly move to terminate using our services,” PayPal’s Gallo stated.

“We have already begun acting versus some of the entities mentioned in the letter that have been found to be utilizing incorrect or misleading messaging/characterization of our items,” he included.

Further, the consumer groups differed with PayPal Credit’s charges and “misleading” introductory no-interest offer, which allows borrowers to defer interest for the first six months.

Ted Rossman, an industry analyst for, cautions all consumers to be cautious of deferred interest.

“Six months without any interest sounds excellent, but a great deal of individuals do not understand that if they stop working to pay the total by the time the clock runs out, they will be charged retroactive interest of 23.99% on their typical daily balance all the way back to the start,” he said.

“That can be very costly.”

Before you obtain to pay for school, you can compare different loans on sites such as LendingTree’s MagifyMoney and Trustworthy to see what choices are best.

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