<p>Having not had an option to ever be on any kind of payment plan when it comes to education, I was intrigued by the option as outlined by S's school. At first I was inspired by folks telling me they use their credit card and earn the bonus points (cash back, miles, etc) that their card might have. However, in the case of the payment plan our son's school uses, there is a 2.1% convenience fee if you want to put anything on a credit card (tuition fees etc). (I don't believe it applies to bookstore/books, although I wouldn't rule it out completely.) That means.. if for some reason a person decided to put their entire private CLA tuition on a credit card, it'd be a charge upwards of $10K. Here I was thinking I'd just rack up a round trip ticket or two on my airline related card when in reality I'd be able to buy nearly 30 round trip tickets for the amount they'll charge me to do so. :-) Even I see this does not make financial sense.</p>
<p>So what I found out is they basically deduct your payment amount from your checking/savings account each month. Payments depend on what, if anything you put down and when. It could be 9, 8 or 7 payments (sons school specifically has all payments ending in March). There;s no interest or other penalty for paying this way except for a 40 enrollment fee. </p>
<p>So I am just wondering: what is the down side of paying by the month? If you were charged interest or the before mentioned "convenience fee" that is anything BUT convenient, I just see it as you get to keep your money earning SOMETHING longer. However, if there wasn't a real downside, why wouldn't more people do it this way? When I spoke briefly to the school, they said only about 300 students out of almost 3000 do it this way whereas most just pay off their bill in August and January. </p>
<p>One of you financial types need to explain it to me. :) I just think I must be missing something. </p>
<p>What are the down sides to paying your tuition over the course of 7-9 months instead of one or two lump sums?</p>
<p>Either you misplaced a decimal point, or I don’t understand what you’re saying.</p>
<p>To get a $10,000 fee at 2.1%, you would have to charge over $476,000. That’s way more than tuition! I think perhaps you calculated 21.0% instead of 2.1%. So, the actual “convenience fee” is more like $1,000.</p>
<p>When you add that to the monthly interest charged by your credit card company, the $40 fee the college charges you to pay in installments looks mighty attractive, doesn’t it? And if you invest that money until it’s needed to pay your installment to the college, you’ll earn a lot more than $40 in investment income.</p>
<p>So, to me, it’s a no-brainer to pay on the installment plan.</p>
<p>Our school offers a three-payment per semester plan, which I pay online out of my checking account. The fee for that is $50 a semester. To pay with a credit card entails a fee of 2.75%.</p>
<p>We’ve done the monthly payment plan for three years for a $70 fee each year. It would have been nice to get points, but as you noted the fee was too high. It’s run by an outside company that handles many colleges, and we send them the payment each month by check rather than having it deducted. Using the payment plan gave us the flexibility to cash in our dedicated investments when it was most beneficial instead of needing to have the money ready in a lump sum each semester. It also gives us the option of deciding each month which accounts to pay from, and for relatives to best time gift monies.</p>
<p>Our prepayment plan also charges a fee to use a credit card. They will do automatic deductions from a bank account, but I prefer to just get billed and send them a check each month since I need to monitor the account balance carefully and time when that check goes out. We spread it out over 10 months.</p>
<p>Your $40 enrollment fee is good though. Ours is $65.</p>
<p>See? I suck at Math. I took 50K and multiplied by .21, but really I should have multiplied by .021, which still doesnt make charging it reasonable for airline points since you could use that thousand for just about three round trip tickets and earning the points on 50K would only give you two.</p>
<p>I can’t see re this particular school that there is any option to pay directly out of your own checking account, it’s all automatically deducted on a certain date each month.</p>
<p>And Rent…
Yeah… I don’t get the whole 8 month thing and that’s only if you set it up by July. If you wait until Aug 1, it’s 25% down and then payments are over 7 months. No idea why the need to be paid off by March instead of April or May?</p>
<p>Still, I’m guessing you only have to have a little bit at a time available at the monthly deduction time, so the rest can be earning interest in CDs, short-term bonds, or whatever.</p>
<p>Yeah, I agree with the above posters … paying by credit card doesn’t make economic sense for most people. We declined the monthly payment plan because at both D’s schools the payments were due June through April. It was simpler to pay full semester bills in September and February. YMMV of course.</p>
<p>No brainer in my mind - take the installment plan and pay the $40. </p>
<p>Assuming that the tuition is $30,000, if you stuck the money in a money market account earning 1.5% per year, and had it pulled out in 10 payments of 3000, you would make just over $200 in interest in the ten months. Subtract the $40 and go have a GREAT dinner with the remaining $160.</p>
<p>scualum - I take your point … especially since you should be able to do a lot better than 1.5%/year. But the installment payments generally start several months BEFORE the semester bill is due for payment, so …</p>
<p>On the other hand, that’s better than the installment plan for D’s private HS. On that one, ALL payments were due prior to the semester bill being due for payment. And the fee for this “service” was $75. eek!</p>
<p>Then the numbers get a little more complicated - but even if you have to start a few months early, it still pays off - just moves you to a cheaper restaurant (hamburgers instead of steak :)</p>
<p>Now the private HS school you described - that one is simply nuts…</p>
<p>Son attends school where they take ccs with no fee so we just pay the whole thing.</p>
<p>I generally prefer to pay the whole amount anyways so that I don’t have to worry about making payments when I’m preoccupied with other things. I like to discharge obligations as soon as possible.</p>
<p>No downside.
We took the monthly plan through student loans in the first half of this decade. We took loans to manage cashflow while maintaining flexibility in making variable and optional payments.</p>
<p>This is a classic case of the ‘time value of money’ and in this case it’s a total no-brainer to spread the payments out over time. The only way it doesn’t make sense is if the $40 is more than the amount the money in question will increase in value over the time period covered by the payments… which, because it’s such a large some, it isn’t. </p>
<p>Businesses use this tactic all the time by always striving to pay bills as late as possible within the agreed deadlines. If you pay early, you simply give free money to whomever you’re paying. Sure on most bills that amount may be a few bucks here and there but companies can save millions a year by holding onto that money a few days longer each month.</p>
<p>The college (or at least its CFO) wants most people to pay up front so that money is earning them, and not you, interest.</p>
<p>For my kids’ U, we don’t have to pay “extra” to charge to the credit card. For S, since he has a merit award for > 1/2 tuition, we just pay our/his portion every semester. For D, since she’s full-pay, we intend to use the installment plan (need to pay $70/semester). Last term, we tried to use it but needed the points to ended up paying the funds a bit earlier than we had to under the plan. Will try again.</p>
<p>For our S’s 1st 2 years, when all his fees & room & board were on the U account, it made sense to use the payment plan & made it easier to budget. When he moved off campus so the room & board were not on the U account, the remaining semester balance made more sense to pay off in a lump sum than paying a fee to pay monthly.</p>
<p>For our kids’ U, you pay monthly from Aug-Dec & then Jan-May. You can use the payment plan for either or both semesters.</p>
<p>Wow, your kids go to expensive schools! My parents pay my tuition, fees, room, and board (about $3700 a semester) at the start of each semester, though I’m probably going to go on the deferred payment plan (3 payments over the course of semester) for the Spring semester, as I’ll be paying myself. I think there’s a $10 or $20 fee for paying online via credit card.</p>
<p>The only downside is that you usually have to start paying a month or so in advance. On the other hand, you finish your payments in March instead of paying for the entire second semester in December, so it is still a better deal for you.</p>
<p>Yea, with our kids’ payment plan, you used to be able to make one or two adjustments to the amount you pay w/o extra charge. Not sure what the new plan allows/charges for & I’ll have to review it before signing up again. It is good to be sure the terms are what you think they are when you sign up.</p>
<p>The interesting & good thing is that the school credits the kids’ account as if all the money has been received once you sign up for the payment plan so you don’t have to worry about any overdue bills. For us, when we use a CC, they just automatically charge the CC every month for the agreed $. Yes, it is a lot every month but less than the huge hunk it would be per semester when all the fees are on the student’s U account.</p>
<p>I looked at the payment plans and they look legitimate an the terms are fair. I don’t use the plans because my DDs school does not charge a convenience fee for credit card paymnets. I detest convenience fees - they leave a bad taste in my mouth. I use a card that rebates 1.5% and time my payment to get maximum float. I end up parting with the cash in November and February.</p>