Monthly payment plans to cover cost of college

By Russell Seidelman, former Assistant Director of Financial Aid at the University of Portland Although colleges and universities are not yet partnering with “buy now, pay later” companies, they have long offered monthly payment plans to families. A low-cost monthly payment plan through the school can be a very reasonable way to use your current cash flow to help pay the tuition bill. They can also be a smart move because they are interest-free, though most come with an enrollment fee ranging from $25 to $125 per semester. Some schools offer discounts for enrolling in a full academic year plan instead of per semester. Making payment arrangements earlier in the summer could make payments smaller and give you more options. Example of a fall payment plan timeline  May 1: Deposit deadline. Yes! The student has decided where they want to go.  May 1: Payment plan enrollment opens.  July 19: Final date to enroll for four-month plan. Four-month plan = auto withdrawal on July 20, August 20, September 20, and October 20  August 19: Final date to enroll for 3-month plan. Three-month plan = auto withdrawal on August 20, September 20, and October 20  August 31: Final date to enroll for two-month plan (note: may require a down payment, such as 33%). Two-month plan = auto withdrawal on September 20 and October 20  Consider your options to pay the fall and spring balance due Let’s assume a student received some scholarships which brought their net price down to $16,000. If they owe the school $16,000 ($8,000/semester), they can pay before, during, and/or after.  Before: Pay the school a lump sum of $8,000 each semester from savings accumulated before college. Tuition is due up to one month before the first day of classes each semester.   During: Pay the school monthly payments of $2,000/month for eight months (four months each semester). This will cost between $25-$125/semester in enrollment fees.  After: Pay the school with loans borrowed from federal and/or private sources. Loans take time to process and need to be applied for early. Families tend to apply in July for the benefit of both the fall and spring semester (as opposed to applying one semester at a time).  Standard repayment plans are 10 years, so even if a borrower starts immediately making payments towards the loan, they will still be making payments after they are done with college, too.  Federal loans have a loan origination fee that should be considered when borrowing. For example, if you need the school to receive $8,000/semester and you have decided on the Direct Parent PLUS Loan, which currently has a 4.228% loan origination fee, then you would need to borrow approximately $8,354/semester, or $16,708 for the academic year. At the current Parent PLUS fixed interest rate of 8.94%, the payment would be around $211/month for 10 years. You’d end up paying back about $25,322, with the total interest paid over the 10 years being around $8,614. Add to this the origination fee of around $708 and your total borrowing cost would total around $9,322.  If the above example is daunting, try not to think about the fact that this is for just one year of college. Multiply these numbers by four years and you can see what advanced planning is required.   Key things to keep in mind when considering a payment plan: 

• Availability varies by school. Check with the Bursar’s Office or Student Accounts Office. 
• Fees may differ for in-state vs. out-of-state or international students. 
• Start early. Some plans begin as early as May, and late enrollment may require catch-up payments. 
• Credit card payments may incur additional fees (2–3%) or not be allowed at all. 
• No credit check is required, and plans can cover any amount, from a few hundred dollars to the entire invoiced amount due.