What Are Tuition Payment Plans and How Can They Save You Money?

college tuition payment plans

Written by: Tracie McGetrick of Student Choice 

It seems like every time I visit a college, I hear someone talking about payment plans and getting their loans paid off when they graduate. And for good reason. If you’re like many college students and you’re thinking about graduating, or someone in your family is, then I suggest you keep reading. If you skip learning about Tuition Payment Plans at your college, you could be missing out on one of the best kept secrets when it comes to keeping the overall cost of your education down. Don’t let that happen to you!

In 1991, I began my 21-year career in Higher Education Finance with a company called Academic Management Services (AMS), known today as TuitionPay. I was young then, and they were good years, but I digress 🙂

The one and only service provided by AMS at the time was administering tuition payment plans for colleges and universities who wanted to allow their students and families a “pay as you go” option for paying for school. At that time, the concept was still fairly new and there were a lot of schools who hadn’t realized the benefits of such an offering (one of the reasons I had a successful sales job for so many years). Today, however, I challenge you to find a college or university that isn’t either administering a monthly payment plan themselves, or using one of the Tuition Payment Plan providers in the industry such as:

  • Tuition Management Systems (TMS)
  • TuitionPay


How Do Tuition Payment Plans Work?

Now that you’re intrigued let me explain how they work. Most payment plans allow you to pay for all or PART of your remaining need. Remaining need means the amount you need to pay out of pocket after financial aid is awarded. With a payment plan you can pay this amount over 10 months (on an annual plan) or 5 months (on a semester plan) using disposable monthly income (you may be working to pay your way through college) or savings.

There is an annual or semester fee (depending on the plan) for taking part. The average annual fee is roughly $60 and the average semester fee is about $35 depending on the plan (of course, you want to check these out with your financial aid department first). There is no interest charged when using this option, as it is not a loan. Let me say that again – slower this time (I’m from New England so I can talk fast) – THERE IS NO INTEREST CHARGED WHEN USING THIS OPTION, AS IT IS NOT A LOAN.

Tuition Payment Plans are constructed so that you begin making monthly payments in the summer months, as early as June/July (which actually helps provide cash flow for the school at a time when it is low) which allows you to defer full payment past the Spring semester billing due date (usually around January) until the May/April time frame. There is no loaning of funds – you actually pay as you go.

  • If the school administers their own program, then they apply the monthly payments to your student account accordingly.
  • If the school uses an outside company to administer their program, you will pay the provider monthly, and then they will disburse the funds to the school according to the timetable agreed upon between the school and the third party provider.

Are you starting to see now why using a monthly payment plan can reduce the overall cost of education?


Tuition Payment Plans Can Make Paying for College a Little Easier

Let me break it down for you. For the sake of example, let’s assume you’ve received your financial aid package. After your financial aid is applied and you and your family go through your flexible costs and reduce expenses where you can (see my blog the True Cost of Attendance), you find out you still need to pay about $10,000 out-of-pocket to meet the annual cost of attendance.

Before you even start looking at how to FINANCE the $10,000, you and your family should look at the Tuition Payment Plan option being offered at your school. You find out your school offers an annual plan, 10 payments with a $65 fee. Like most families, you can’t afford $1,000 a month in disposable income or savings so you close the browser and start looking at your financing options.

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This is by far the most common mistake families make – and why they end up paying more for higher education. A tuition payment plan is not an “all or nothing” proposition. There is nothing written in fine print that says you have to either pay the whole $10,000 on a monthly payment plan, or finance it! If you can make the full payment – great – if you can’t, you still have options.


Paying a Little Now Can Save You a Lot Down the Road!

You and your family should start by looking at your combined monthly income and savings and decide on an amount you are all comfortable paying out of pocket each month towards your education. Then you can search for financing options to cover the remainder. Even if it’s $200 a month, that’s $2000 a year!

AND remember, you are not going to school for just one year. You may go for two, four or maybe even five year (unless of course you’re going to be a doctor and that’s another post..). That’s $8-$10,000 that you and your family don’t have to finance, and therefore will not pay interest on, keeping the OVERALL cost of your education at a minimum!

At this point, I can almost hear the clicking and I see the light bulbs going on! Now you can tell why paying as you go using Tuition Payment Plans can save you so much money in the long run. Ok – you’ve read my blog, so what are you waiting for? Go search your school’s website for their Tuition Payment Plan option and if you can’t find it, pick up the phone and call your Financial Aid Office today – it may save you hundreds or even thousands in the long-run!

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