A tuition reimbursement plan is a lesser-known way to pay for college while you’re in school. It breaks your education bill into smaller payments, allowing you to pay in installments over time.
Remember, how you decide to finance your college education will be one of the most important decisions you make in your life.
While many students opt for student loans or financial aid packages, this is not the only way to pay for college. In this article we’ll dive into how tuition payment plans work, how much they cost, and some things you should be aware of before signing up for one.
How do tuition payment plans work?
Tuition payment plans are offered by most colleges and universities but are not as well known or as advertised as student loans.
A tuition payment plan is issued to you by your university. Unlike a typical private student loan, tuition repayment plans are usually interest-free. Think of it as an interest-free installment loan that you pay while you sign up. Instead of paying for your school expenses with interest after you graduate, a repayment plan allows you to pay for your college education incrementally while you are in school—usually each month of the year.
Most payment plans are either 4-5 months or 10-11 months, depending on whether you do it by semester or year.
Depending on the school, a tuition payment plan may be divided into multiple payments during a semester or for the entire academic year. Similar to student loans, most tuition payment plans are managed by third-party services like Nelnet. While you pay your school directly, these third-party services collect and process payments on your school’s behalf.
Reasons to consider a tuition payment plan
There are several reasons why you should consider using a tuition payment plan.
First, depending on how much money you have saved for college, you may want to take advantage of the current financial climate. Keeping some cash in a savings account — ideally, a high-yield savings account — allows you to earn interest while making your rainy day fund easily accessible in case of an emergency. Instead of dipping into your savings and paying your tuition bill in a lump sum, a tuition payment plan breaks it up into smaller payments.
Other students may want to use a tuition payment plan as a way to avoid costly student loans. This may be especially useful for someone who goes to school part-time or plans to complete their studies more slowly beyond the typical four years.
To enroll in a tuition payment plan, contact your school fund office. The registration process, service and registration dates vary from school to school. Contact your treasurer’s office to find out what you need to do to enroll at your university.
What are the costs of tuition payment plans?
Tuition payment plans can be a low-cost alternative to student loans But it’s usually not free. Although the payment plan does not usually charge interest, there are fees that students should consider.
Enrolling in a tuition payment plan usually comes with an enrollment fee. This varies by university and can range from $25 to $500. For example, my alma mater charges a non-refundable annual registration fee of $75. Fees may apply on a semester or full year basis. If you miss the registration window, you may have to pay a higher registration fee.
You may also have to make a down payment on your tuition bill as part of the enrollment process. Although this payment is added to your account, it can be a large fee at the beginning of each semester or academic year.
Each service has its own policies when it comes to fees. Some may charge late fees while others may charge a fee if you pay with a credit card.
Finally, you may also be required to purchase tuition insurance as an additional cost to cover your tuition fees if you stop making payments.
Pros and cons of tuition payment plans
A tuition payment plan can be a good alternative for students to pay for college, especially if they want to avoid falling into debt. Here are some advantages and disadvantages of tuition payment plans.
Pros
- No interest fees
- There is no credit check
- Payment can be made in smaller installments
- Reduces the risk of getting into long-term debt
- Lower fees than student loans
cons
- There are additional costs involved
- Installment plans may not cover related expenses, such as housing or meal costs
- Payments can be high, especially at expensive universities
- It is still possible to go into debt if the installment plan is paid off with a credit card or other borrowed money
- A change in your financial situation could affect your ability to make tuition payment plan payments
Alternatives to tuition payment plans
A tuition payment plan is one option to pay for college but it is certainly not the only way.
Before enrolling, it’s a good idea to complete the Free Application for Federal Student Aid, or FAFSA. This can help you figure out what types of student aid you qualify for, including grants and work-study programs.
Once you have your student aid information, you can make a plan to figure out how to cover your expenses. Scholarships are one option. This is free money that is given away every year and does not have to be repaid.
You can also look into private student loans. While these loans don’t come with the same protections as federal student loans, they can come at lower rates and are more accessible.
Finally, find creative ways to meet your needs. If housing is your biggest expense, consider becoming a housing consultant. Or find a side hustle you can do to cover some of the educational related costs.
A tuition payment plan is a new way to pay tuition over time. It can reduce your overall costs and help you graduate debt-free. But before you enroll in one of these programs, evaluate your financial situation and make sure it makes sense for you.
