There are many ways to pay for college: borrowing, saving, earning scholarships or grants, and paying-as-you-go. But paying-as-you-go doesn’t always mean you have to have a full semester's worth of cash on hand. Schools might offer tuition payment plans, allowing tuition payments to be spread out over the course of a semester or even the full academic year. Here's what you should know...
Tuition payment plans vary in length.
Tuition payment plans come in a variety of formats and terms. One variable is how long you have to repay the money. Before signing up, find out when payments are due and how many payments there will be. One common example is a payment plan with one payment midway through the semester.
The office that handles payment plans may be different at each school.
Generally, tuition payment plans are available through the student accounting office. But the payment plans could be offered through another office, such as financial aid or the bursar. Before thinking that a tuition payment plan doesn’t exist, make sure you’ve inquired with all the offices that handle student finances.
You may pay a flat fee or a percentage of the total tuition and fees.
A flat fee means you’re paying a set price to borrow the money. For instance, you may get charged a flat $50 whether you end up borrowing $10,000 or $5,000 toward the total cost of attendance. If it’s a percentage, then the fee you pay is simply a percent of what you borrow. For instance, 1 percent of $5,000 is $50.
There are easy ways to compare the fee versus the cost of borrowing.
Let’s say the fee is $50 to borrow the money for one year and you borrowed $5,000. Add $50 to $5000 and divide by 12 months to get a monthly payment of $420.83. You’d then call up the financial aid office and ask how much the monthly payment would be to borrow a student loan for the same amount. You can also call up a private lender and ask for a monthly payment amount based on this amount of borrowing. Compare monthly payment options before making your decision.
You can choose a tuition payment plan for part of your loan.
You don’t have to pay off your entire tuition bill this year. Borrow part of the money, and then choose an amount that you know you can repay within the year on the tuition payment plan. For instance, if your budget for college tuition is $400 per month, you could repay $400 per month.