|Colleges decline credit card tuition payments
|By Cara Nissman Bankrate.com
In the past decade, using a credit card to pay tuition
bills had some definite benefits: You could earn a stack of rewards
points quickly, it was a quick source of cash to pay the bills
or it was simply convenient.
But now, more and more parents and students are being forced to pocket the plastic each semester as fewer universities accept credit cards for tuition payments.
Postsecondary institutions, ranging from two-year
community colleges to four-year private universities, are staging
a fee backlash.
"It's across the board," says Randy Coleman, the director
of treasury services at Utah State University. "Everybody I talk
to at cash-management conferences is hurting."
Utah State changed its policy in 2004 after more than
a decade of swallowing a merchant fee of approximately 2 percent
per tuition payment. The school of nearly 24,000 enrolled students
decided it could no longer accept Visa credit-card payments.
Merchant fees to blame
"What was killing us was Visa would not let us charge our students a convenience fee to make up for the merchant fees," says Coleman. "We were paying $350,000 in merchant fees."
Boston College, which also paid about 2 percent in
fees for each tuition payment and had more than $70 million in credit
card transactions in 2002, stopped accepting credit cards for tuition
payments altogether three years ago because it did not pass the
fees on to the school's more than 12,500 students.
"It was a loss every year for the university," says
spokeswoman Kathleen Sullivan.
The University of Washington started accepting credit
cards for tuition payments four years ago, but school officials
are already considering ending the policy. A fee of $45 added to
each tuition payment has not kept the school of 40,000 students
from experiencing an annual loss.
"We are hoping we can come to an agreement with the
credit card merchants for a better flat-fee situation to make up
for the loss, but we are at a critical point here," says Ruth Johnston,
senior associate treasurer. "We are going to get together and see
what we can do before the term starts, but if we can't come to an
agreement, we are probably going to dump the credit cards."
Alternative ways to pay
Maybe "dumping" the credit cards wouldn't be such a bad thing --
especially for students paying their own tuition. Undergraduate
students have an average outstanding balance of $2,169 in credit
card debt, according to a Nellie Mae study, and it's not all going
to kegs and clothes. About a quarter of students who have credit
cards billed to them use their credit cards to pay tuition, according
to an American Council on Education report. Fifty-five percent of
students who charge their tuition carry a balance.
Forgetting about the frequent-flier miles, if parents
and students are using credit cards to pay for tuition because they
can't dole out a lump sum, a better move, say college experts, would
be to eschew high interest rates by using an interest-free payment
plan offered by their colleges, in partnership with monthly payment
programs, such as TuitionPay through Sallie
Mae or Tuition
Management Systems. These companies allow families to sign up
for a five- or 10-month payment plan with an enrollment fee ranging
from $30 to $60, depending on the school.