Tuition payment plans are one method that allow parents and students to pay tuition expenses over a short period of time, typically less than 12 months. These plans are often interest-free but often have some fees associated with them, although they are generally pretty low.
Most of these plans allow you to set up payments to the college directly through your bank account on a monthly basis. These plans can be a good option for parents who can afford tuition, but can't manage to make one large payment in the beginning of the academic year.
So how do you know if a tuition payment plan is the right option for you?
1. If you are going to be making your tuition payment plans via credit card, you may want to reconsider.
Be wary of using your credit card to make your monthly tuition payment via tuition payment plan, unless you know you can absolutely afford to pay off your credit card each month. Credit cards have high interest rates and an education loan may be a better option for you if you are going to be carrying your tuition balance on your credit card. Also, pay attention to whether or not there is a transaction fee for paying your tuition payments via credit card. If this is the case, it may not be worth it even to get points on your credit card.
Fees for missed payment can be high, so make sure you understand what they will be if you miss a payment or think you may be late on your payments before taking the tuition payment plan route.
3. If your job is unstable.
If there is a chance you may lose your job during the upcoming year, will you still be able to afford to make your tuition payment plan payments? If not, you may want to consider an education loan that has forbearance options. These loans typically carry interest, but may offer more repayment flexibility so you have to assess which option is right for your family. Plus, there aren't pre-payment penalties on most education loans, so you can reduce your finance charges by paying off the loan this year if you keep your job.
Overall, tuition payment plans are a great option, but they aren't for everyone. If you need more than a year to pay of your year's tuition, consider an education loan. Start by looking at the Federal Stafford Loan and go from there.
Need help assessing your options for paying for college?
Book a free appointment with the College Planning Center of Rhode Island.