Tuition payment plans are offered by most colleges and universities as a way to help families pay tuition monthly versus in one lump sum at the beginning of each semester.  A tuition payment plan allows you to make payments monthly for your outstanding balance to the school once any aid, scholarships, and grants have been deducted from the total cost of attending. Most colleges and universities bill students once per semester and payment plans align with those billing cycles for a nominal sign-up fee that can range from $35 per semester up to $100 per semester.  Typically, everyone is eligible, no credit requirements to participate and no interest is applied, the only costs are the one-time sign-up fee and possible late payment fees, which can vary. Minimum and maximum balances may also apply and can vary by school.  To sign up for a payment plan, visit the bursars, business office or financial aid page on your school’s website, they may have a link readily available.  If not, just give one of these offices a call and they can instruct you. 

Tuition payment plans, if you have the discretionary monthly funds, can greatly reduce the amount you need to borrow.  Payment plans are quite flexible in that you can pay what is a comfortable amount for your monthly budget and not a penny more. 

You expect to owe approximately $20,000 (10,000 per semester) after all aid and scholarships.

Scenario 1:  Your monthly budget allows you to pay $1,000 per month (5 payments for fall and 5 payments for spring) to the school.  Congratulations, that is $10,000 per year you will not need to borrow reducing student debt by possibly 40,000 over the 4-year period should you continue to use the payment plan in the same manner for future years.  In this scenario, you may need to look for alternative finance options offered by either federal or private lending for the balance due not covered by your tuition payment plan.

Scenario 2: Your monthly budget allows you to pay $500 per month (5-fall, 5-spring) directly to the school.  Congratulations, even though you couldn’t pay the total amount due you can reduce your borrowing need by $5,000 per year and $20,000 total over the 4-year period.  As in  the scenario above, you may need to look at alternative finance options offered by either federal or private lending for the balance due not covered by tuition payment plan.

Unfortunately, tuition payment plans do not fit into everyone’s budget as each family’s financial circumstances vary.  But for those who can fit a payment plan into paying for higher education, the benefits can be significant for minimizing student debt.

Important to remember, a payment plan does not have to be all or nothing, (paying the entire balance or borrow the entire balance) be sure to look at any affordable monthly payment amount within your budget as an option to reduce your borrowing need and carefully review your alternative finance options.

For additional information on options for paying for college, download our free Borrowing Guide.