For students and parents, the bill for college tuition may have arrived or will be arriving shortly. Before paying the tuition bill, you need to review the invoice carefully and make sure that all the items listed are correct. As the cost and student debt continues to rise, we want to give families a procedure to minimize their cost before the first payment is made.
These bills have gotten confusing over the past few years. Many colleges have created a’ la carte pricing based on major selected and housing options. New fees have been added due to COVID, so take the time to review the invoice before you begin payments or sign your loan documents.
Here are 5 Top Steps that We Recommend:
Access to the College Tuition Bill
First, how will this bill arrive? More colleges use a “paperless” billing system which means that the student will receive an email notification that the college bill is due. This notification is sent to your child via their student’s web portal at the college. It’s important to make your child aware that the bill will be coming to them. We also recommend that you check with the college and see if they have a parent portal to view financial aid and billing statements. To gain access to that system you may need some of the student’s info such as student ID number to register. The financial aid office or bursar’s office will normally be the contact resource.
Colleges consider your children to be adults now and this is one way that the process starts. In some cases, the student will need to invite you to get access. This access may include other things such as grades and other financial items.
Reviewing the Tuition Bill
Once you have the tuition bill in hand, you need to review this list of items. Many of these items were identified during the acceptance, orientation, and financial aid verification process. Make sure it matches your initial decisions.
Tuition Bill Items to review:
- Room size- Prices often vary depending on room selection with a single room being the most expensive. Make sure the room selection is correct.
- Meal plan – Many new students do not have a meal plan choice during their first year. If you think the meal plan is too much, check if it can be downsized. Due to COVID, some colleges have changed their billing and policy around this process.
- Health Insurance – This is a fee sometimes listed on the bill that can usually be waived once proof of Health insurance is produced. Follow the process to get that waived. Some colleges have added a COVID protocol fee now. This is an additional charge if the student gets COVID on campus.
- Payment Options – Check with the bursar for payment options, specifically what tuition installment plans are available and the process. Parents should also inquire if there is a fee to set up the installment payment plan. The first payment is usually due in August, so there is plenty of time to investigate and develop your plan.
- Financial Aid – During the verification process, most colleges will send a list of items that were the same or very similar to the financial award letter. The student and parent should have accepted some or all of these items. It is recommended that you verify these numbers.
- Federal Loans – The bill will indicate what federal loans you are eligible for. We think it is important for the student and parent to understand the type of loans they will be accepting. PayForED’s, “Ultimate Guide to Student loans”, reviews the definitions of the subsidized and unsubsidized federal loans as well as Parent PLUS loans and private loans.
If you have accepted a Federal Direct Loan (Subsidized or Unsubsidized) for the first time, the student must complete both Entrance Counseling and sign their Master Promissory Note online. If the parent is going to use a Parent PLUS loan, they will need to follow the same procedure. Confirm with the college the correct process. Missing loan requirements will delay the disbursement of funds.
Accepting & Disbursement of Student Loans
If a parent and student have decided to finance some of the tuition bill using a federal student loan, you need to understand how this money will be disbursed. The student and parent first need to agree that they will be taking the loan listed on their bill. The borrower will be required to complete the Student Loan Promissory Note and complete the student loan entrance counseling. The Department of Education will send the loan amount directly to your college and it will be applied to your tuition.
The amount that is agreed is normally the annual amount based on the college’s college’s cost of attendance. The loan funds disbursed will be based on the academic structure of the college. This could be semester, tri-semester, or quarterly.
Any remaining money would be sent to the student and can be used for books and other expenses. You do have the option to decline any extra money. Remember, this is a loan and it will need to be paid back. If you don’t need it, don’t take it. Typically, there is a 120-day window after the loan is disbursed during which you can return a portion of the loan amount.
In most cases, your loans will be received at least 10 days before classes start. This is dependent on when the student or parent signs the promissory note and entrance training. We recommend you speak to your college’s financial aid office to confirm this disbursement. Some schools may withhold some funds to confirm that the student is actually making academic progress.
The loan funds will pay the direct expenses of the college. This will include tuition, fees, and on-campus room and board. The remaining amount will then be disbursed to the student. Each school has its own process. You should confirm the timing and method of the remaining balance. Some use a debit card and others use a direct deposit to a bank account.
Paying with Savings
Most colleges offer various payment plans that help families pay the bill over the current semester or school year. This is sometimes offered through a third party and some additional fees may be applied. If a family has good cash flow, this could be a great option.
Some students and parents have college savings accounts which could be another method of paying the bill. If you are using 529 college saving plan money, remember that they are limited to qualified expenses. The 529 plan qualified expenses include tuition, fees, room, board, books, and supplies directly related to the courses taken.
Often overlooked is the proper use of the American Opportunity Credit. This is a tax credit per student that can be as much as $2,500 per year. This educational tax credit is only available for the first 4 years of college. Families need to remember that the tax years and school years do not match. The sequence of how a person is paying their tuition could have an impact on the proper use of the American Opportunity Credit.
Funding Financial Shortfalls
After reviewing the current bill, there could be a financial shortfall or lack of funds to pay the rest of the tuition bill. To pay that shortfall, more families need to finance the cost of a college education. There are several options available.
- Parent PLUS loans
- Private Student Loans
- Other Personal Loans such as Home Equity or Personal Loans
If you have any questions about your final college bill, call your college’s Student Financial Aid Office or Bursar for help. Families can also get guidance from a College Funding & Student Loan Advisor (CFSLA). A CFSLA advisor has been trained in College Funding and Student loan repayment and is an expert in this area. The PayForED website has a list of advisors by state.
The PayForED system projects a four-year projection of cost and total debt at graduation. If you have a funding shortfall over the four years, it may be a smart idea to invert the borrowing. Interest rates are at record lows. It may be beneficial to lock in a lower interest rate this year and use savings in the outer years. This will depend on each family’s situation.
PayForED has a Preferred Lender Marketplace that you should visit to evaluate this inverted borrowing approach.
Paying Tuition Summary
Paying the college tuition bill is a complex process that is often understated. An important reminder is that a person’s debt structure will determine their repayment and forgiveness options in the future. This is why more people need to do additional planning and the reason it is so important. The proper utilization of financial aid, college savings, taxes, and student loan will determine the net cost. Having an annual plan each year is a way to avoid excessive student loans and have a brighter financial future.
Our Preferred Private Student Loan Lenders
Variable Rates: 3.99%- 14.86% (APR)* Fixed Rates: 3.99% - 14.96% (APR)* Variable Rates*: 5.49% – 15.83% Fixed Rates*: 4.50% - 14.83% Variable with ACH: 5.86%- 14.14% Fixed with ACH: 4.62% - 14.99% Variable Rates: 3.98% - 11.99% (APR)* Fixed Rates: 3.98% - 11.99% (APR)*
Variable Rates: 3.99%- 14.86% (APR)*
Fixed Rates: 3.99% - 14.96% (APR)**Rates includes .25% Auto Pay Discount
Variable Rates*: 5.49% – 15.83%
Fixed Rates*: 4.50% - 14.83%*Lowest rates shown included auto debit discount
Variable with ACH: 5.86%- 14.14%
Fixed with ACH: 4.62% - 14.99%
Variable Rates: 3.98% - 11.99% (APR)*
Fixed Rates: 3.98% - 11.99% (APR)*