Barclaycard US, which said in February that it had acquired the $1.3 billion Upromise portfolio, will issue new cards to the program's Bank of America customers in September. DePaulo said in the interview yesterday that the decision to end the relationship with Bank of America was made by Sallie Mae.
Citigroup Inc., the third-biggest U.S. bank, posted a $127 million gain in 2008 when it sold the Upromise card portfolio to Bank of America, according to a regulatory filing. The card portfolio had balances of about $1.2 billion at the time.
Kevin Sullivan, a Barclays spokesman, declined to say what the company paid for the portfolio.
Tax-Free Gains
Cardholders receive cash back for college when making purchases through the Upromise website, 4 percent at participating restaurants, as much as 3 percent at eligible gas stations, 2 percent at movie theaters and 1 percent on all other purchases, Sullivan said. There's no annual fee or minimum spending requirements.
Upromise Investments, with assets of $41.3 billion in 31 plans across 16 states as of March 31, generates revenue by providing program management services for 529 accounts, according to Deborah Hohler, a spokeswoman.
Money earned from spending with the card may be invested in a 529 plan, deposited into a Sallie Mae savings account, used to pay down student loans or redeemed for a check, Hohler said.
The 529 plans are set up by states and generally offer tax- free gains on earnings if used to pay for eligible college expenses. Assets in 529 savings plans totaled about $158 billion at the end of the first quarter, according to Boston-based Financial Research Corp.
Charges for in-state students at public four-year colleges, including tuition, fees, room and board averaged $17,131 for the most recent school year, according to the New York-based College Board. At private, nonprofit four-year schools, costs averaged $38,589.
"You're going to have to find multiple ways to save because that is a big number," DePaulo said. "This is one component of how you save."