Forty-four percent of students stress over balancing college costs with other expenses, according to a report by Sallie Mae — 60 percent of parents face the same challenge.
One way to make college payments simpler comes in the form of a tuition payment plan. This option is offered by many schools and allows you to pay tuition in installments, rather than in one lump sum.
A tuition payment plan could help you and your family better balance the cost of college. If that’s not enough, consider this sweet benefit: You could end up with less student debt. Here’s how these payment plans work.
Make monthly payments on a tuition payment plan
If your college offers a tuition payment plan, you don’t need to cover the cost of tuition in one fell swoop. Instead of paying everything at the start of the year or semester, you can spread your tuition payments out over time.
“A tuition payment plan breaks down the college bill into monthly bite-sized pieces [and] spreads the payments over nine or 12 months,” said Deborah Fox, Founder of Fox College Funding in San Diego. “Instead of parents or students having to come up with a large fee for each quarter or semester, they can sign up for [this] plan.”
Schools define the rules of the plan, but they typically use an outside company, such as Higher One or FACTS, to manage payments. Often you can choose the amount you wish to finance on a tuition payment plan. Usually, it’s whatever gap you have after financial aid.
“The amount that can be paid by a tuition payment plan will be the amount leftover after any grants, scholarships, or loans are subtracted from the total college cost,” said Fox.
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.
Tuition payment plans are typically interest-free, though you might pay a small enrollment fee. Speak with your college’s financial aid office to learn about your payment options.
A tuition payment plan could mean less student debt
Without a tuition payment plan, you might have to take out a loan to cover the cost of college. But if you can spread your school payments out over time, you might not need this advance. As a result, 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,” added Howard.
Carol Suter, director 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,” she said.
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 debt in half. By mixing and matching your methods for paying tuition, you’ve saved money on interest.
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.
The downsides to tuition payment plans
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 charge a fee to enroll in the plan; others charge a fee if you miss a payment. FACTS charges $30 if it can’t collect payment due to insufficient funds. Your college could charge you an additional fee, too.
Tuition payment plans also have a limited scope — they usually don’t cover costs beyond tuition. You’ll still be responsible for the costs of books, school supplies, and personal expenses. Depending on the school, even housing and food costs might not be eligible for a payment plan.
According to College Board, the average student at a four-year public college pays $1,298 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.
Overall, there aren’t a ton of downsides to tuition payment plans. But before signing up for one, learn about its potential costs and limitations.
Speak with the financial aid office about your options
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.
“If the student’s choice of school is partially dependent on what they can afford, they can make a more thoughtful choice about what is really important to them when choosing a school,” said Suter.
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.
Need a student loan?Here are our top student loan lenders of 2018!
|1 Important Disclosures for CollegeAve.
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.
2 Important Disclosures for Discover.
3 Important Disclosures for Ascent.
Before taking out private student loans, you should explore and compare all financial aid alternatives, including grants, scholarships, and federal student loans and consider your future monthly payments and income. Applying with a cosigner may improve your chance of getting approved and could help you qualify for a lower interest rate. Ascent Student Loans may be funded by Richland State Bank (RSB) or Turnstile Capital Management, LLC (TCM), which are not affiliated entities. Certain restrictions and limitations may apply. Ascent Student Loan products are subject to credit qualification, completion of a loan application, verification of application information and certification of loan amount by a participating school. All loan products may not be available in certain jurisdictions. Other terms and conditions apply. Ascent is a federally registered trademark of TCM and may be used by RSB under limited license. Richland State Bank is a federally registered service mark of Richland State Bank.
* Application times vary depending on the applicants ability to supply the necessary information for submission.
* 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.
4 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
5 Important Disclosures for PNC.
PNC Bank is one of the nation’s largest education loan providers. For over 40 years, PNC has been committed to helping students and their families make possible the adventure of college.
6 Important Disclosures for SunTrust.
Before applying for a private student loan, SunTrust recommends comparing all financial aid alternatives including grants, scholarships, and both federal and private student loans. To view and compare the available features of SunTrust private student loans, visit https://www.suntrust.com/loans/student-loans/private.
Certain restrictions and limitations may apply. SunTrust Bank reserves the right to change or discontinue this loan program without notice. Availability of all loan programs is subject to approval under the SunTrust credit policy and other criteria and may not be available in certain jurisdictions.
SunTrust Bank, Member FDIC. ©2018 SunTrust Banks, Inc. SUNTRUST, the SunTrust logo and Custom Choice Loan are trademarks of SunTrust Banks, Inc. All rights reserved.
7 Important Disclosures for LendKey.
Additional terms and conditions apply. For more details see LendKey
8 Important Disclosures for CommonBond.
A government loan is made according to rules set by the U.S. Department of Education. Government loans have fixed interest rates, meaning that the interest rate on a government loan will never go up or down.
Government loans also permit borrowers in financial trouble to use certain options, such as income-based repayment, which may help some borrowers. Depending on the type of loan that you have, the government may discharge your loan if you die or become permanently disabled.
Depending on what type of government loan that you have, you may be eligible for loan forgiveness in exchange for performing certain types of public service. If you are an active-duty service member and you obtained your government loan before you were called to active duty, you are entitled to interest rate and repayment benefits for your loan.
A private student loan is not a government loan and is not regulated by the Department of Education. A private student loan is instead regulated like other consumer loans under both state and federal law and by the terms of the promissory note with your lender.
If your private student loan has a fixed interest rate, then that rate will never go up or down. If your private student loan has a variable interest rate, then that rate will vary depending on an index rate disclosed in your application. If the interest rate on the new private student loan is less than the interest rate on your government loans, your payments will be less if you refinance.
If you don’t pay a private student loan as agreed, the lender can refer your loan to a collection agency or sue you for the unpaid amount.
Remember also that like government loans, most private loans cannot be discharged if you file bankruptcy unless you can demonstrate that repayment of the loan would cause you an undue hardship. In most bankruptcy courts, proving undue hardship is very difficult for most borrowers.
9 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|3.69% – 10.94%1||Undergraduate, Graduate, and Parents||Visit CollegeAve|
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