How to Take Advantage of College Tuition Payment Plans Today

While you may not be able to use a tuition payment plan to cover the full cost of your education, this option can help you lessen your dependence on traditional loans and graduate with less financial stress.

This guide tells you how tuition payment plans work, outlines the many different types of tuition plans and how they compare to more traditional college financing, and gives examples of specific schools that offer each type of plan.

How Do Tuition Payment Plans Work?

Tuition payment plans help qualifying students and their families cover the costs of college via monthly installments rather than through loans. They help you avoid interest fees associated with loans and to become debt-free by graduation.

Some schools administer their tuition payment plans in-house, while others contract them to third-party payment processing companies.

The following section answers the most common questions that students and their families considering this option typically have.

Things to Consider:

Are there enrollment fees?

That depends on the individual school. Some waive tuition payment plan enrollment fees while others charge a small amount. At Florida Atlantic University, for instance, students pay a non-refundable fee of $15 as part of enrollment.

How much can you afford to cash flow?

Before committing to a tuition payment plan, think carefully about how much cash flow you can realistically commit each month or semester. The answer to this question differs for every student.

What other expenses do you have?

While tuition is often the most expensive part of attending college, students must also consider additional expenses they have. These include housing, school supplies, books, fees, transportation, food, and utilities.

Are there any tax breaks for paying in cash?

In some cases, yes. If you qualify for the American Opportunity Tax Credit, you can deduct up to $2,500 per year for the first four years of higher education. You may also qualify for the Lifetime Learning Tax Credit.

Advantages and Disadvantages of Tuition Payment Plans

Advantages:

• Reduced or no student loan debt Cover costs remaining after scholarships and grants. Avoid the high-interest rates associated with student loans.
• Break tuition into more manageable payments over a semester or year Pay smaller amounts each month rather one up-front payment. May be ideal if you’re paying for school out of pocket.
• Fees for tuition plans are typically much lower than interest on student loans Many don’t charge interest since you pay the debt when it’s due. Conversely, student loan rates can be 3.7%-6.3% depending on the type.
• No credit check is required Do not require a credit check for approval since you’re not receiving a loan. Conversely, student loans can require credit checks since you’re borrowing money.
• Automatic payments (ACH) are available Automatic payment scheduling is an option to help you avoid late or missed payments. Great if you’re confident you’ll have the money in your account each month.

Disadvantages:

• Not always realistic at more expensive schools May be unrealistic at an expensive private university, which may result in you taking out student loans anyway. Might be more feasible for in-state tuition at a public university.
• Some fields of study won’t allow student loan forgiveness plans May negate the use of loan forgiveness plans, such as that offered by the U.S. Department of Education for qualifying students like teachers or nurses.
• There may be service fees for using a credit or debit card May lead to processing fees on credit or debit card payments. You might can avoid this fee by writing a check or paying with cash, if optional.
• Credit card interest fees can add up to more than a loan would cost Interest on credit cards—if using the card to pay for tuition and not paying the card off each month—can be substantially higher than student loan interest.
• Changing financial circumstances may make payments unrealistic Financial circumstances can change quickly making it hard to make payments. You may end up forced to take out a student loan to continue school.

Types of Tuition Payment Plans

Students and their families have several payment plans to choose from, allowing them to find one best suited to their financial circumstances. This section helps you learn about each one, so you can make an informed and confident decision.

When reviewing the different types of tuition payment plans, remember that not all are available at every school. If you have your heart set on a specific school – or even a specific type of payment plan – you may need to be flexible.

The following overview of the various types of financial payment plans available can lead you in the right direction.

Standard Payment Plans

Standard payment plans provide the most conventional approach to tuition payments outside of student loans. Benefits of this type of payment plan include:

• Flexible payment options: Break up payments across terms or semesters; for instance, instead of paying $10,000 upfront for two 5-month semesters of education, you pay $1,000 per month over 10 months
• No accrued interest: Does not incur interest as long as you make payments on time and, if using a credit card, you pay your balances off each month

3 Colleges with Standard Payment Plans

1. Valencia College

Based in Orlando, Valencia College provides a standard repayment plan that requires students to pay a fixed monthly amount based on the cost of their education.

2. Emory & Henry College

Virginia-based Emory & Henry College offers a standard semester-based payment plan that can be divided into four or five months. Students sign up for the plan online and make no-interest payments across the fall and spring semesters.

3. Rutgers University

Known as the Rutgers University Tuition Payment Plan (RUTPP), this option allows students to make monthly payments interest-free using their bank accounts, credit cards, or debit cards. Using a card does incur a 2.7% service fee per payment.

Deferred Payment Plans

Some colleges offer deferred payment plans, providing even greater flexibility for students who may struggle with making payments while enrolled in school.

Features of deferred payment plans:

• Pay later: You can move your payments to a later date rather than withdrawing from college. For example, if you owe $10,000 per semester, a deferred payment plan may allow you to pay 50% of this amount during the semester followed by additional installments until the amount is paid off.
• Rules vary between schools: Individual schools set guidelines for how deferred payment plans work, making it important for you to carefully review requirements and discuss options with financial aid staff.
• Stipulations: Typically, you cannot have any existing or overdue balances to qualify.

3 Colleges with Deferred Payment Plans

1. The University of Tennessee at Knoxville

At UT Knoxville, students can pay 50% of their term charges alongside a $30 service fee at the beginning of the semester. This allows them to wait an additional 45 days to pay another 25%, followed by another 30 days before the final 25% is due. There’s a $35 late fee for each missed payment.

2. The University of California at Davis

The deferred payment plan at UC Davis includes tuition, housing, health insurance, and various fees and allows students to pay monthly installments by the 15^th of each month. Students must enroll in this plan online and pay an enrollment processing fee.

3. Northern Michigan University

NMU’s deferred payment plan helps students who have yet to finalize financial aid awards defer payments for tuition, fees, and housing until they have their finances sorted out. For instance, those who apply for deferred payment for the fall semester do not need to make a payment until the beginning of September.

Pre-Payment Plans aka Tuition Locks

Pre-payment plans, also known as tuition locks, are helpful for students who may be challenged by fluctuating tuition rates. Here’s how a pre-payment plan might affect you:

• You can “freeze” your tuition and pay the same rate as your first semester for the entirety of your time at an institution.
• You avoid yearly tuition hikes at some schools, which result in you paying more each year you’re in school.
• Some schools may require you to pay the full amount in advance, while others require payment at the beginning of each semester.

3 Colleges with Pre-Payment Plans

1. Boston University

Boston University allows students to prepay tuition at the current rate for between four and eight semesters. To lock in the current rate, funds must be paid up-front. Students must also stay enrolled on a full-time basis and have at least two years of study remaining.

2. University of Maryland, Baltimore County

Through the Maryland Prepaid Tuition Plan (MPTP), students planning to attend UMBC can set up this plan and begin saving money long before college. When the first bill is received, parents forward this to the MPTP and they disburse the funds directly to the university

3. Stonehill College

Students attending Stonehill University in Massachusetts can lock in their first-year tuition rates for all four years of attendance by paying in advance. Students must be incoming freshmen and pay funds before the start of each semester. Those who receive grants or scholarships are not eligible.

Payment Plans vs Student Loans: Savings Over Time

Students and their families have to make a lot of decisions related to paying for college, and figuring out whether payment plans, student loans, or a mix of the two make the most sense can feel confusing.

While paying for college out-of-pocket over the course of a degree program can help save a significant amount of money over time from lack of interest payments, it’s important to avoid getting into a financial bind.

With this in mind, consider how much money you stand to save in interest payments and whether a payment plan seems workable with your current budget.

Now its time to put it all together with a real-life scenario.

Let’s say your tuition costs $20,000 total for a four-year degree. Here’s your possible financial forecast if you take out a student loan:

• The borrower charges you 4.66% interest to be paid back over 20 years.
• Your college degree would end up costing $30,783—that’s over $10,000 more than the cost of tuition!
• Yes, you can save a little if you pay it back sooner than 20 years, but it’s still a lot of money and can vary based on the interest rate.

But what if you consider a tuition payment plan instead?

• Pay $5,000 out of pocket each year for the four years you’re in school—totals the $20,000 you owe.
• You can save over $10,000 in the long run!
• Yes, you might end up paying a plan enrollment fee or processing fee if you pay with a credit or debit card. But these end up totaling far less than the interest you would pay on a student loan.

Did you know you can actually mix both payment options? Try breaking it up this way:

• Pay $3,000 out of pocket each year instead of $5,000.
• Take out an $8,000 loan to cover the remaining costs—rather than $20,000 for the entire tuition.
• By borrowing $12,000 less, you avoid paying the interest on this amount.
• This is ideal if your program is more expensive or if you might qualify for student loan forgiveness in the future.

Student Loan vs Payment Plan:

How to Take Advantage of a Payment Plan

There are a few steps to take if you think you might want to take advantage of a payment plan. Keep reading to learn what your next steps should be.

Know Your Numbers

Before enrolling in any tuition payment plan, speak with your school’s financial aid office to understand exactly how much you will owe for educational expenses, both per semester and for the year.

It also helps to know what scholarships and grants, if any, you will receive in order to determine this number.

Decide How Much You or Your Family Can Contribute

After getting this number, figure out how much you and your family can contribute and whether this is enough to cover the remaining costs or if you’ll need to take out a student loan.

Financial aid advisors at individual schools can help walk you through this process and answer questions along the way. They can also make you aware of the various types of tuition payment plans available as well as when and how frequently payments must be made.

Set It Up

After deciding to use a tuition payment plan to fully or partially cover the cost of college, it’s time to get it set up with your school.

Institutions that manage their payment plans internally have unique enrollment rules and information needed. Schools working with third parties defer to them for required documentation and enrollment procedures.

Pay Attention to the Details

Some schools require students to enroll in payment plans each semester, meaning they need to pay an enrollment fee each time.

This is the case with Blue Ridge Community College, for example, which uses Nelnet to manage its payment plans. Details of the plan:

• Must meet enrollment deadlines each semester
• May be disenrolled from classes for failure to enroll in the plan on time
• Must set up a payment account with a bank account, credit card, or debit card

Schedule Your Payments or Set up Auto Pay

If using a deferred payment plan, students need to pay close attention to deadlines for each payment in order to avoid late fees or potentially be disenrolled from classes. Those enrolling in a standard monthly payment plan can set up automatic payments to avoid late fees.

Get Help if Needed

If you ever have a question about your tuition payment plan, reach out to the financial aid office at your school immediately. This helps ensure continuity of payments and keeps you on the path to earning your degree.

An Expert Weighs In

A passionate student advocate, Stuart Siegel is a nationally respected financial aid expert. Having helped thousands of families navigate the process, Siegel has helped parents save thousands and reach their goal of affording their child’s dream school.

An industry insider for 25 years, Siegel is the founder of FAFSAssist, an online platform offering tools and access to experts helping parents navigate the financial aid process from start to finish. Stuart is also Director of the College Family Care Center for Collegiate Funding Solutions serving independent financial advisors and members of the Pentagon, NASA, and Boeing Corporation federal credit unions.

What advice would you give to students considering using a tuition payment plan?

First, not all colleges use tuition payment plans. If parents are considering them, they should inquire on the college’s website first.

Tuition management services allow parents to pay the college in equal installments rather than in the two traditional or sometimes three semesters. Typically, payment programs offer 8-, 9-, and 10-month options.

If parents have the resources, don’t want to pay by semester, and like having to more easily budget expenses, choosing a payment plan can be convenient. But they don’t cover all aspects of what the college can charge. Parents need to be aware that they may still owe the college money even after they make all of their payments.

Before tuition and fees are finalized, parents and students should take full opportunity to review all acceptance offers and negotiate the lowest price. Many parents don’t know this is an option, and most don’t know the student should be doing the written outreach.

What are the benefits of these as opposed to student loans?

There are caps on how much a student can borrow from Federal Direct Loans each year. A freshman can borrow a maximum of $5,500. If part of the loan is unsubsidized, interest does and will accrue. When using a tuition bill pay plan, there is no interest accruing on the balance of the college bill.

What are the detriments of tuition payment plans?

Like many secure online programs, setting up an account can be onerous. Depending on the amount of information the college wants you to include in the application, some of which can only be estimated, it might be easier to just send in a check before the bill is due.

Also, some plans charge a fee if you miss a payment, and the college can assess a fee if you’re late on a payment as well. And it should be known that some plans charge an application fee per semester.

What are some components that students should consider before using a payment plan?

Again, it’s the parents who need to consider using the plan. The plan will only cover the expenses that the college bills for. Books, personal expenses, and transportation to and from school are not included.

Also, some payment plans bill your credit card or withdraw money from your bank account. If parents have a 529 Plan to pay the account balance, some plans don’t allow you to pay from the custodian of the account (i.e., Ameritrade). Better to withdraw the 529 money and pay the bill as a one-time payment per semester.

Where can learners get more information (on-campus or online) to make an informed decision?

The best place for specific advice is the college the student will be attending. Either the financial aid office’s webpage or the bursar’s office will have everything you need to know.

Final Thoughts

Tuition payment plans have grown in popularity in recent years and for good reason. Whether using a standard plan, deferred plan, or pre-payment plan, these options help students avoid substantial student loan debt and lock in lower costs.

Not all colleges offer tuition payment plans and even those that do have individualized ways of offering this service. Pay close attention to what’s available, how to enroll, and the expectations when using these types of plans.

Even if you cannot pay for college fully out-of-pocket with a payment plan, utilizing this option can cut down debt and reduce loan interest payments, making them a worthwhile consideration for many students