For students and parents, the bill for college tuition may have arrived or will be arriving shortly. Before paying the tuition bill, you must review the invoice carefully and ensure all the items listed are correct. As the cost and student debt continue to rise, we want to give families a procedure to minimize their costs before making the first payment.
These bills have gotten confusing over the past few years. Many colleges have created a la carte pricing based on academic major selections and housing options. Most colleges have various fees that appear, 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, meaning 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 essential to make your child aware that the bill will be coming to them. We also recommend you check with the college to see if they have a parent portal to view financial aid and billing statements.
To gain access to that system, you may need to register with some of the student’s information, such as the student ID number. The financial aid or bursar’s office will generally be the contact resource.
Colleges consider your children to be adults now; this is one way the process starts. Sometimes, 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, you need to review each item. It is more detailed than the initial financial award. Make sure the scholarships and other reductions appear on the statement. Usually, 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 changed.
- Health Insurance -This fee is sometimes listed on the bill and can usually be waived once proof of Health insurance is produced. Follow the process to get that waived. Confirm your child is covered and understands the rules for coverage since they may have limited out-of-state or network coverage.
- Payment Options – Check with the bursar for payment options, specifically the available tuition installment plans and the process. Parents should also inquire if there is a fee for setting up the installment payment plan. The first payment is usually due in August, so there is ample time to investigate and develop your strategy.
- Financial Aid – During the verification process, most colleges will send a list of items that are 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 essential for students and parents to understand the type of loans they will be accepting. PayForED’s “Ultimate Guide to Student Loans” reviews the definitions of 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 must follow the same procedure. Confirm with the college the correct process. Pay attention to loan requirements to ensure 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 must understand how this money will be disbursed. The student and parent must first agree to take the loan listed on their bill. The borrower must complete the Student Loan Promissory Note and the student loan entrance counseling. The Department of Education will send the loan amount directly to your college, less the fees. It will then be applied directly to the outstanding balance.
The agreed amount is usually the annual amount based on the college’s cost of attendance. The loan funds disbursed will be based on the college’s academic structure. The disbursement amount 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 can decline any extra money. Remember, this is a loan and 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.
Your loans will usually be received at least ten days before classes start. This timing depends on when the student or parent signs the promissory note and entrance training. We recommend you contact your college’s financial aid office to confirm this disbursement. Some schools may withhold some funds to verify that the student is actually making academic progress.
The loan funds will pay the college’s direct expenses, including 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. These plans are sometimes offered through a third party, and some additional fees may be applied. This payment method could be a great option for a family’s cash flow.
Some students and parents have college savings accounts, which could be another method of paying the bill. If you are using 529 college savings plan money, remember that it is limited to qualified expenses. The 529 plan qualified expenses include tuition, fees, room, board, books, and supplies directly related to the courses.
Often overlooked is the proper use of the American Opportunity Credit. This tax credit per student can be as much as $2,500 per year. This educational tax credit is only available for the first four 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 impact the proper use of the American Opportunity Credit.
Funding Financial Shortfalls
After reviewing the current bill, a family may identify 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 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 cost projection and total debt at graduation. If you have a funding shortfall over four years, it may be wise 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 strategy depends on each family’s situation.
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 determines repayment and forgiveness options. This lack of planning can cause significant financial problems for parents, as Parent PLUS Loans are increasing at an alarming rate. The colleges do not provide this advice or projections. It is so important since we see more parents’ student loan decisions impacting their retirement. Properly utilizing financial aid, college savings, taxes, and student loans 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: 5.59%- 16.85% (APR)* Fixed Rates: 4.29% - 16.69% (APR)* Variable Rates*: 5.37% – 15.70% Fixed Rates*: 4.25% - 15.49% Variable with ACH: 5.99%- 15.85% Fixed with ACH: 4.04% - 15.41% Variable Rates: 6.00% - 14.22% (APR)* Fixed Rates: 4.50% - 14.22% (APR)*
