If you need to borrow money for a year or less, a tuition payment plan offered by your college can be a cheaper option than student loans. It also can help quite a bit with overall budgeting for both the student and parent.
What Is a College Tuition Payment Plan?
College tuition payment plans help families pay tuition bills over time instead of all at once. Generally, payments are monthly and must be completed before the end of the associated academic term.
How Do College Payment Plans Work?
Schools set a policy for when tuition and fees are due. If you can’t make the payment in one lump sum, most schools offer tuition installment plans. Payments are then spread out over the course of a semester, quarter or academic year in monthly installments.
Tuition Installment Plan Enrollment
There are generally two options to enroll:
- Students first log into the school’s website and look for a payment plan option in the section of the website that shows their bill. Then, they’ll answer a series of questions about payments, such as who the authorized payer will be. It’s usually the student or the parent. The student may then be redirected to finish the process through a third-party installment plan provider, such as Nelnet or Heartland ECSI.
- Go directly to the tuition installment plan provider and select your school from the list. Rather than guess who the installment provider might be, you can contact your school’s financial aid or bursar’s service to find out.
You’ll typically have to pay an enrollment fee or application fee. For instance, the City University of New York has enrollment fees as low as $25 per semester, while George Washington University’s enrollment fees start at $45 per semester.
Payment plan enrollment dates may vary, and enrolling later may mean larger and fewer payments. It could also mean a higher enrollment fee. For instance, the fall 2020 semester enrollment period at George Washington University in Washington, D.C. began on June 11. If you enrolled after July 21, you would have been required to pay an $80 enrollment fee, or $35 more than if you enrolled sooner. Plus, you’d have had to make a down payment of 25% of estimated semester charges.
How to Make Payments
Payments may be made either through your school’s payment portal or directly through the third-party provider’s website. You typically can pay by electronic check, credit card or Automated Clearing House (ACH) recurring payments that are set up in advance.
Credit card payments may incur high fees. At Temple University in Philadelphia, students are charged a 3.5% fee for payments made with credit cards. There is no charge for paying by eCheck from a checking account. For every $1,000 payment you’d be charged $35 more if you paid by credit card.
International students may need to use a wire service if they don’t have a U.S. bank account. Check with your school for accepted payment methods.
Depending on the school, parents may make payments for multiple students through the same payment system. Again, you’ll need to ask your school about its payment policy.
Tuition Payment Plans: What Do They Cover?
Colleges individually decide what payment plans cover, but they are generally for tuition and fees. Room and board and meal plans may have their own payment plan and scheduling options. Because each aspect of college can have its own payment schedule, you should review each cost separately. Are there other dorm payment options that may save you money? Will you take out a student loan to pay for them? What meal plan should you choose that lines up with how many meals your student will eat on campus?
What if Your Finances Change?
There are times when you sign up for a payment plan and then can’t afford one or more payments. In this case, you should contact the school. If the student or student’s family hits a financial snag due to unexpected circumstances such as a job loss or medical emergency, the student should also contact the financial aid office and submit a special circumstances form to see if more financial aid might be available.
A portion of the tuition you pay from anything other than college savings accounts, grants or scholarships may be refunded through tax benefits such as the American Opportunity Tax Credit. Through this credit, up to $2,500 of tuition charged may be returned per dependent student. The first $2,000 and 25% of the next $2,000 is refundable , provided income requirements are met.
Advantages of College Tuition Payment Plans
- Neither the parent nor the student will carry debt—potentially for years.
- You can make monthly payments rather than having to pay for full semesters or quarters in one lump sum.
- The fee charged is often much lower than student loan interest and origination fees on student loans. Origination fees have to be paid even if you pay back the loan the next day.
- There generally isn’t a credit check, unlike with private student loans.
- You can set up a payment plan once through ACH and know you’re all set for paying off tuition.
Disadvantages of College Tuition Payment Plans
- At a pricey college, tuition may be too high to pay off by the end of each academic period.
- You may be able to have a portion of your federal student loans forgiven after as little as 20 years under income-driven repayment plans.
- Colleges may charge service fees if families pay by credit card, even if it’s a debit card.
- If paying by credit card and you don’t pay the balance off in full, the interest you pay over time could cost more than student loan interest would.
- Parents paying for tuition and fees are taking on the burden and may deplete money they could have been using for their own retirement savings or student loan payments.
- If the student’s or family’s financial situation changes, the monthly bill can become untenable.
Tuition instalment plans are a low-cost option for families who can afford tuition in monthly payments, but who don’t have the money in their budget to pay for tuition all at once. The cost is higher if families use credit cards to make the payments. However, families should consider their overall financial picture, including the parents’ retirement plans and savings before choosing a college tuition installment plan over student loans.
Originally posted by: https://www.forbes.com/advisor/student-loans/college-payment-plans/