If you’re worried about producing large sums of cash to pay for college, there’s a simple, available way to make payments easier — a tuition payment plan. This option is offered by many public and private schools, allowing you to pay your tuition in installments, rather than in one lump sum.
Using a payment plan could help you stay within your budget and save money during college, as these plans don’t charge interest like loans do. At the same time, this option isn’t without its downside.
Some schools offer a monthly payment plan over nine to 12 months, while others allow you to make payments once or twice during each semester. There are even schools, like New York University, that offer multiple types of plans.
The amount you pay with a tuition payment plan is typically based on what you owe for tuition after factoring in financial aid, grants and work-study funds.
Tuition payment plans allow parents and students to avoid having to make large payments annually or each semester, which can be tough on household budgets. Most schools define the rules of their own plans, but they may use an outside management company, like FACTS, to handle the payments.
Example of how a plan may work
Let’s say you owe $5,000 for tuition after all your financial aid has been applied. You decide to spread the cost out over 10 months, resulting in a payment of $500 per month. That’s still a hefty bill, but could be a lot more manageable than putting down $5,000 all at once, depending on your budget.
Not only do tuition payment plans let you pay your tuition costs over time, but they usually charge minimal fees for doing so — unlike student loans, which can come with an origination fee plus interest charges.
In addition, signing up for a tuition payment plan doesn’t call for a credit check and interest doesn’t apply. Speak with your college’s financial aid or bursar’s office to learn about your payment options.
A tuition payment plan could mean less student debt
Being on a tuition payment plan could mean taking out fewer student loans — if any — meaning you could save a lot of money on student loan interest.
“Very few universities charge interest, which adds up to a substantial amount of savings as parent loans carry high interest rates,” said Elisia Howard, owner and founder of college consulting company College Insight.
“I usually recommend [families] pay what they can using a tuition payment plan and take out the rest in loans, which can be paid over the course of years,” she added.
Let’s consider our previous example: You owe $5,000 in tuition. After looking at your budget, you can only afford to pay $250 each month toward tuition. You pay $2,500 using a 10-month tuition payment plan and take out a $2,500 loan to cover the rest. Instead of taking out a $5,000 loan, you’ve cut your student loan debt in half. By mixing and matching your methods for paying tuition, you’ve saved money on interest.
Carol Suter, assistant vice president of student financial services at Southern New Hampshire University, echoed Howard’s advice to be strategic about paying for college: “If funding is seen as a strategy, where a plan using multiple resources is utilized, it could be possible to save money over the long term.”
When it comes to paying for college, take a look at all your payment options. Then, consider using a few different approaches to minimize the amount you take out in loans.
Though tuition payment plans can offer an affordable way to pay for school, they also come with a few possible drawbacks.
Some payment management companies used by schools charge a fee to enroll in the plan, while others charge a fee if you miss a payment: For example, tuition management company FACTS charges $30 if it can’t collect payment due to insufficient funds. Your college could charge you an additional fee, too.
You still owe the college money, even on a plan
Tuition payment plans also have a limited scope — they usually don’t cover costs beyond tuition, so you’ll still be responsible for the costs of books, school supplies and personal expenses. Plus, depending on the school, housing and food costs might not be eligible for a payment plan either. According to the College Board’s most recent data, the average student at a four-year public college pays $1,240 each year for books and supplies.
You’ll need to save up to cover these essential costs of attending college. If you can’t pay these extra costs out of pocket or with scholarship money, you might need to cover them with student loans.
Plus, some schools, like the University of Washington in Seattle, don’t even offer payment plans.
Overall, there may not be a ton of downsides to tuition payment plans — but before signing up for one, you should learn about its potential costs and limitations.
Each individual college has its own policy for tuition payment plans. If you’re interested, ask your school’s financial aid office about your options.
As you research and apply to schools, make sure to consider the cost of tuition. By understanding the costs and how to cover them, you can make the best choice for your educational future.
Maya Dollarhide contributed to this report.
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|* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers. |
1 Important Disclosures for College Ave.
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
Rates shown are for the College Ave Undergraduate Loan product and include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.
Information advertised valid as of 4/22/2021. Variable interest rates may increase after consummation. Lowest advertised rates require selection of full principal and interest payments with the shortest available loan term.
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3 Important Disclosures for CommonBond.
Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. If you choose to complete an application, we will conduct a hard credit pull, which may affect your credit score. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.15% effective Jan 1, 2021 and may increase after consummation.
4 Important Disclosures for Earnest.
5 Important Disclosures for SoFi.
UNDERGRADUATE LOANS: Fixed rates from 4.23% to 11.26% annual percentage rate (“APR”) (with autopay), variable rates from 1.22% to 11.66% APR (with autopay). GRADUATE LOANS: Fixed rates from 4.13% to 11.37% APR (with autopay), variable rates from 1.12% to 11.73% APR (with autopay). MBA AND LAW SCHOOL LOANS: Fixed rates from 4.30% to 11.52% APR (with autopay), variable rates from 1.29% to 11.89% APR (with autopay). PARENT LOANS: Fixed rates from 4.60% to 10.76% APR (with autopay), variable rates from 1.22% to 11.16% APR (with autopay). For variable rate loans, the variable interest rate is derived from the one-month LIBOR rate plus a margin and your APR may increase after origination if the LIBOR increases. Changes in the one-month LIBOR rate may cause your monthly payment to increase or decrease. Interest rates for variable rate loans are capped at 13.95%, unless required to be lower to comply with applicable law. Lowest rates are reserved for the most creditworthy borrowers. If approved for a loan, the interest rate offered will depend on your creditworthiness, the repayment option you select, the term and amount of the loan and other factors, and will be within the ranges of rates listed above. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. Information current as of 4/1/2021. Enrolling in autopay is not required to receive a loan from SoFi. SoFi Lending Corp., licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. NMLS #1121636 (www.nmlsconsumeraccess.org).
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
Undergraduate Rate Disclosure: Variable interest rates range from 1.68% – 11.98% (1.68% – 11.07% APR)Fixed interest rates range from 4.24% – 12.40% (4.24% – 11.43% APR).
Graduate Rate Disclosure: Variable interest rates range from 1.91% – 11.63% (1.91% – 11.33% APR). Fixed interest rates range from 4.64% – 11.93% (4.64% – 11.61% APR).
Business/Law Rate Disclosure: Variable interest rates range from 1.91% – 10.19% (1.91% – 9.47% APR). Fixed interest rates range from 4.38% – 10.44% (4.38% – 9.72% APR).
Medical/Dental Rate Disclosure: Variable interest rates range from 1.91% – 8.99% (1.91% – 8.69% APR). Fixed interest rates range from 4.28% – 9.24% (4.28% – 8.94% APR).
Parent Loan Rate Disclosure: Variable interest rates range from 2.49% – 8.33% (2.49% – 8.33% APR). Fixed interest rates range from 4.94% – 8.58% (4.94% – 8.58% APR).
Bar Study Rate Disclosure: Variable interest rates range from 4.46% – 9.60% (4.46% – 9.54% APR). Fixed interest rates range from 7.39% – 12.94% (7.40% – 12.83% APR).
Medical Residency Rate Disclosure: Variable interest rates range from 3.55% – 7.05% (3.55% – 6.78% APR). Fixed interest rates range from 6.99% – 10.49% (6.98% – 10.09% APR).
Variable Rate Disclosure: Variable Rates are based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of May 10, 2021, the one-month LIBOR rate is 0.11%. Variable interest rates will fluctuate over the term of the loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree and presence of a co-signer. The maximum variable rate is the greater of 21.00% or Prime Rate plus 9.00%.
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Federal Loan vs. Private Loan Benefits: Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer. Borrowers should carefully review federal benefits, especially if they work in public service, are in the military, are considering possible loan forgiveness options, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision on our website including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.
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Automatic Payment Discount Disclosure: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount.
7 Important Disclosures for Discover.
Lowest APRs shown for Discover Student Loans are available for the most creditworthy applicants for undergraduate loans, and include an interest-only repayment discount and a 0.25% interest rate reduction while enrolled in automatic payments.