Tuition payment plans can be a great option to pay for higher education. As the spotlight continues to shine on college affordability and excessive student loan debt, many families are seeking more ways to manage the costs.
What Is a Tuition Payment Plan?
Tuition payment plans spread out college fees into installments so you can pay over time (usually up to one year) instead of making one lump sum payment. They can also be a great alternative to borrowing loans. A tuition payment plan splits college bills into equal monthly or academic term payments. Since the installments are smaller, paying for college out of pocket may be doable for some families.
For the most part, tuition payment plans carry a low fee or finance charge that rarely exceeds more than $100-$200. But unlike loans, there is no interest.
Most plans restrict the payments to just the direct costs paid to the college or university, such as tuition and fees and, in some cases, campus-owned/controlled housing and meal plans. And most tuition payment plans allow the family to set up an automatic transfer from a bank account to pay the installment payments.
Alternative to Federal Student Loans
Tuition installment plans are a less-expensive alternative to federal or private student loans, or incurring long-term debt in general. This is because there are no interest charges and installments are paid over a period of 12 months or less instead of a lengthy repayment period. And unlike loans, most tuition payment plans do not require a credit check.
Here’s an example of what a tuition payment plan might look like:
$12,600 tuition bill
9 monthly installment payments of $1,400 each
Add a $100 enrollment fee for a total amount paid of $12,700
This table compares the cost of a tuition installment plan with a Parent PLUS loan, assuming that the fees for both are paid up-front. Using a tuition installment plan saves the family approximately $5,000 in interest and fees.
Short-Term vs. Long-Term Financing | Tuition Payment Plan | Parent PLUS Loan |
---|---|---|
Amount Financed | $12,600 | $12,600 |
Interest Rate | N/A | 7.6% |
Fees | $100 | $531.26 (4.264%) |
Repayment Term | 9 months | 10 years |
Monthly Payment | $1,400 | $157 |
Total Payments | $12,700 | $18,786 |
Total Payments (First Year) | $12,700 | $1,884 |
Tuition payment plans are especially popular among middle and high-income families at higher-cost colleges. These plans are also helpful for families of all income levels who want to better manage their monthly cash-flow (budgets).
Tuition Installment Plan Providers
Students and parents can sign up for a tuition payment plan through the bursar’s office, cashier’s office or the college financial aid office. Each college typically contracts with only one tuition installment plan provider. Some colleges manage their own monthly payment plan.
The most popular providers of tuition installment plans include:
- ECSI Tuition Payment Plan (TPP)
- FACTS Tuition Management – Acquired by Nelnet in 2005
- Tuition Management Systems (TMS) – Acquired by First Marblehead in 2010
- University Accounting Service (UAS) – A subsidiary of NCO
What to Read Next
How to Pay for College Without Financial Aid
Federal Undergraduate Student Loans