When students use credit cards sporting the iconic block 'M', they're supporting more than just school spirit — they’re also supporting a profitable relationship between the University of Michigan’s Alumni Association and Bank of America worth $25.5 million.

Under an 11-year contract, which started in June 2003, the Alumni Association provides Bank of America with student and alumni information, and in return the Alumni Association reaps revenue based on the number of credit card accounts that are opened.

Although the Alumni Association says the contract is directed at University of Michigan alumni and not solely at students, the association makes $25,000 per year from student accounts. Other schools across the country have similar credit cards deals, which have come under review from Congress and from critics who argue that such accounts are a contributing factor to rising student credit card debt.

DEFENDING THE CONTRACT

Jerry Sigler, senior vice president and chief financial officer of the University’s Alumni Association, defended the contract with Bank of America, saying that the association puts more funds into student programming and scholarships than the amount of money generated from students opening credit card accounts.

Sigler said there are 70,000 alumni accounts opened under the contract, and only 1,500 student accounts. From these 1,500 student accounts, the University receives $25,000 per year.

Last year, Sigler said the Alumni Association put $650,000 into 370 scholarships and funds for students from the $2.5 million it generated from the affinity program — an agreement between the bank and university that includes Bank of America credit cards trademarked with the University’s logo. As part of the contract, the Alumni Association is paid royalties from Bank of America, including 0.5 percent of retail purchases made by each credit card account.

“In terms of that credit card revenue, we’re probably reinvesting in student programs 20 times what we earned last year from student credit cards,” Sigler said. “I get frustrated with the implication that we’re making millions of dollars off students. We’re making very little and supporting significantly in supporting and funding students.”

Sigler added that the Alumni Association, a non-profit organization, puts an additional $50,000 into the Division of Student Affairs to fund leadership training and credit-related emergency loans.