While many families and students attend. turn around Loans fill gaps pay for college, a tuition installment plan is one way to manage those hefty bills – it could even reduce or eliminate the need to take on debt.
“It’s definitely worth finding out if the college or university offers this option rather than finding other loans,” says Jaqueline Smith of Boston, who uses an installment plan to pay her 19-year-old daughter’s tuition fees North Carolina State University.
The career coach says using an installment plan was a straightforward process and helped her avoid a loan. “It was really easy and they withdrew monthly payments,” she says.
Almost half of parents – 44 percent – say they have a hard time balancing college with other expenses, according to a recent Sallie Mae poll.
An installment plan allows a parent or student to take a break from tuition and pay a balance over a 9 or 10 month period. So if, for example, there is a payment gap of $ 5,000, the balance can be spread over 10 months with a monthly payment of $ 500.
“An installment plan just makes it easier because it’s spread out over a period of time,” says Melissa Sotudeh, an investment advisor at Halpern Financial, Inc. based in Rockville, Maryland. “
1. Some schools have more than one installment plan. Most schools only offer one installment plan, which is usually administered through a third-party provider, experts say.
Some larger universities offer more than one installment program, experts say. New York University, for example, offers more than one interest-free installment plan: the deferred payment with three fixed installments during a semester and the tuition fee plan, which is administered by a third party.
“Usually, it’s the better-equipped schools that can,” says Joe Orsolini of Glen Ellyn, Illinois, a financial planner at College Aid Planners, Inc. “Their state schools tend not to offer that. “
However, experts say that not every school has an installment plan.
“For schools that don’t have an installment plan, there are private organizations that do, but generally these fees are higher,” says Sotudeh.
2. Most plans come with a registration fee. “They usually come with a small cost – usually a service charge, which is typically between $ 30 and $ 100,” says Shannon Vasconcelos, a college financial advisor at College Coach and former grant officer at Boston University and Tufts University.
For example, the Smith family pays a $ 45 enrollment fee for the North Carolina State’s Interest-Free Plan – a service administered by Tuition Management Systems that many schools use. The payments for each semester are divided into even amounts over a period of five months.
“It’s a monthly payment that is taken every semester from June and lasts until November. And then it starts again for the spring semester,” says the mother from Massachusetts.
3. The enrollment fees can be lower than the interest on a student loan. CUNY — Hunter College and CUNY – LaGuardia Community CollegeTo name a few schools, use Higher One, Inc. The company, a third party company, charges a fee. A $ 2,000 tuition credit through Higher One can have an enrollment fee of $ 35, which equates to an interest fee of 3.85 percent, according to the company’s website.
But even at 3.85 percent, Orsolini says, it’s still less than the interest on a Parent PLUS loan. A direct Parent PLUS loan paid out after July 1, 2016 bears a fixed interest rate of 6.31 percent.
“That’s a much higher rate,” says the Illinois investment advisor.
4. Many plans do not accept credit cards and some require a fee to use the option. Most of these plans don’t allow credit card payments. But when they do, there is usually a convenience fee.
“You may be billed for the privilege of using your credit card,” says College Coach financial advisor Vasconcelos. “I’ve seen it on the order of 2 to 3 percent.”
Because of this, Smith chose to use her checking account when she signed up for the tuition plan to pay for her daughter’s education.
5. Most wealth planners advise choosing an installment plan only if it stays within the family budget. Financial advisors warn families who are unable to make the monthly payments to consider other options, such as:
“It has to be a family that can really cover the installment costs,” says Sotudeh from Halpern Financial. “If they cannot cover these installment costs, they have to ensure this before school starts with grants, loans and scholarships.”
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