Tuition on Installment Plan
College payment plans
Packing up a child for college and wondering how you’re going to make that whopping tuition payment a few weeks from now? Even students who are lucky enough to qualify for financial aid often must come up with a significant sum to cover the unsubsidized portion of their tuition and book bills.
However, what many parents and students don’t realize is that you don’t necessarily need to take out a loan if you can’t pay the whole amount upfront. Literally thousands of schools offer tuition payment programs that allow you to pay the bills over the course of the year.
Better yet, although it may involve a service fee, there’s usually no interest charge, so those who need to finance a fairly substantial debt would do better to go this route than to borrow.
How do these programs work? They vary based on the school. Some schools simply offer informal, short-term payment plans for students who show up at registration short of cash. In these instances, the school aid or guidance counselor may simply work out a deal in which the student will pay the remaining tuition over a period of three or four months.
Other schools offer formal programs in which students may pay the bill over the course of the academic year--usually 10 months. The cost of these formal programs can also vary, but Academic Management Services, which administers programs at 1,500 schools nationwide, including Stanford, Yale, Harvard and Santa Clara University--charges a $50 enrollment and administration fee for its basic monthly payment plan. The fee covers sending monthly bills and the cost of a term life insurance policy that will kick in to pay tuition bills if the wage earner happens to die during the year, says William A. Hastings, president and chief executive of the East Providence, R.I.-based lending company. There’s no interest expense.
(AMS offers a second program, with a $90 annual fee, that includes tuition insurance for involuntary unemployment, but few schools request it.)
How does this cost compare with taking out a loan? The monthly payments are higher. But the overall expenditures tend to be significantly less.
Consider a student who needs to come up with $2,000 in tuition. If that bill must be paid in September, the student’s parents may be able to borrow the cost at 9%. If the parents could pay off the loan in a single year, the monthly payments would be $174.90 and the total interest paid would amount to roughly $99. If they pay loan fees, too--which are common--that boosts the expense further.
On the bright side, they can stretch repayment out over longer periods to reduce their monthly expenses. However, that also increases their total interest costs. Paying the bill over three years, for example, would result in cutting the monthly payments to $63.60 but would increase the total amount paid back to $2,289.58--a $191 increase in the overall interest cost.
If this student opted for a 10-month tuition payment plan, the monthly payments would amount to $200. The only financing expense would be the $50 annual registration fee.
To find out if your college offers a monthly tuition payment plan, call the school’s administration or financial aid office. You can also call AMS directly if you want to know whether your college subscribes to its programs. That number: (800) 635-0120.
* Small business financial advice
Those who have started--or have tried to start--a small business know that the biggest challenge facing a start-up company is money. It’s tough to get financing before you have a track record, and it’s tough to establish a track record without sufficient financing.
MasterCard International addresses this Catch-22 in a 150-page book called “The Small Business Financial Resource Guide: Sources of Assistance for Small and Growing Companies.” The book goes through a host of financing options ranging from federally insured Small Business Administration loans to state agencies that can assist fledgling companies.
MasterCard printed 130,000 copies of the book and said they would be distributed free through a host of partnering organizations, including American Bankers Assn., National Small Business United and the National Assn. of Female Executives. However, a reporter calling these organizations discovered that each was charging between $3 and $11 to consumers who asked for the book.
(A touch of irony: American Bankers Assn. was selling the books to its members in packages of 10 for $17.50. An ABA operator said bankers were buying them to give to their customers. However, small business owners who have accommodating bankers probably don’t need the book.)
MasterCard now has a toll-free number of its own so consumers can get a free copy as originally promised. That number is (800) 821-6176. In addition, the U.S. Chamber of Commerce is giving the books away. It can be reached at (202) 463-5503.
Consumer Checklist is a weekly feature that covers a range of pocketbook issues of interest to Californians. To contribute information about new legislation, products, services or surveys, write to Kathy M. Kristof, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053; or e-mail kathy.kristof@latimes.com.
