I spent 12 years working in college admission and here’s one of the sentences that rolled off my tongue almost immediately every time a student said, “I’m planning to go to your school!”
I’d say, “That’s awesome! Have you heard about our fabulous 10-month payment plan?”
Okay, okay, it wasn’t exactly the first thing I said, but it was up there with, “Congratulations! I’m so excited for you. Can I send you some of our college swag for your graduation party?” and, “I’m so thrilled for you! What did Grandma Bess say?” (We got to know our students — and their families — really, really, really well.)
At any rate, I still brought up our college’s 10-month payment plan during every single financial aid meeting because I truly believe that a tuition payment plan is one of the best ways to break down college costs. (Also, I was giddy literally every time someone wanted to talk about it. I would also always bring it up during every first-time meeting with families.)
I vividly remember one mom saying, “Wow, breaking the costs down with a payment plan really makes paying for college doable, doesn’t it?”
“Isn’t it awesome?” I replied, beaming because she got it.
Here’s what you need to know about installment plans and why they just might make you jump up and down, too!
What’s an Installment Plan?
An installment plan isn’t a brand-new concept. You may have used an installment plan to pay back a loan. It simply means you pay for an item in fixed amounts at specified intervals — you make small payments over time.
An installment plan for college can have several different names:
- Monthly payment plan
- Tuition installment plan
- 10-month (or 8-month or 9-month) payment plan
- A branded name from the college or university your child plans to attend
You take a $10,000 lump sum and spreeaaaad it out — like butter!
Most colleges’ installment plans cover only the direct costs billed by and paid to the college, which includes:
- Room and board (only applicable if your child lives on campus)
- Books, supplies, equipment and transportation to and from school are not covered.
- It does not include things like transportation, school supplies and other outside expenses.
Some colleges and universities have their own tuition installment plans but most use outside providers like Nelnet Business Solutions.
Here’s why installment plans are a tremendous gift for anyone who’s sending a child to college, including you.
1. An installment plan might allow you to squish debt.
Your out-of-pocket cost (the amount you owe for college after financial aid is taken out) is sort of like the worst part of a horror movie — you can’t unsee it, can you?
You dream about that $10,000. You wake up and that $10,000 is the first thing you remember when you wake up.
Reframe it instead. You can even have a tiny bit of fun with it. What happens when you break it down into smaller chunks?
This is what we’d do in the admission office:
I’d say to Mrs. Lamb, “Is it possible to work with $10,000 if it’s chopped up? What if the cost was only $1,000 per month? Could you cancel some subscriptions, pay off the car or get a side gig to help out?”
Mrs. Lamb needed to retrain her brain. She’d say, “Oh. It’s not $10,000?”
She was so fixated on that $10,000 that she had trouble thinking around it. She couldn’t unsee it!
What happened with Mrs. Lamb in the end? She happily signed up for a 10-month payment plan and didn’t have to take on any debt at all.
2. You can pay and borrow using an installment plan.
Now, our fictitious amount — $1,000 — might not be your out-of-pocket amount. What if it’s not $1,000 and instead, is more like $4,000 per month instead — or more?
You might be balking at those out-of-pocket costs. After all, you’ve got vehicle payments, mortgage payments, private school tuition, groceries, cat vet bills — the costs add up fast.
And what happens when other unexpected bills show up? For example, during this very week in my own life, there is a mouse living in my minivan. We cannot find it. It’s living under the dash, happily chewing wires and carpet and dragging dog food into the air conditioning vent. I’m literally not kidding.
Anyway, sorry for the disgusting example, but the point is, we might have to get a new car because this mousetrap-dodging mouse will not come out from under the dash. He is destroying the car and dodging my poor husband’s every move. It’s amazing how even a mouse can destroy your best-laid plans.
So, what do you do if the pinch is too much (you might be nervous about those mice, too!) but you know you want to contribute to your child’s college tuition? You can take out a loan and make payments using an installment plan. (Check out my article on how to apply for a Federal Parent PLUS Loan in 6 easy steps.)
For example, let’s say you look at your monthly budget and figure out that you can’t quite swing the $1,000 that the installment plan would require but you can manage, say, $400 per month instead. Take the rest out in loans!
Combining tactics is a great option. That way, you’re still helping your child but you also make sure you don’t endanger your ability to live your own life and have enough money to make your other payments.
3. You and your child can tackle college payments together.
Unless your child received a windfall from Great Auntie Gertie, it’s going to be virtually impossible for your high schooler to pay for college in full, right? Not so when you break down the costs using a tuition installment plan. Why not work together to make the monthly payments? It can be a “you-pay-half and I’ll-pay-half” scenario.
Maybe your child works as a movie theatre usher or as a barista at a local coffee shop. In that case, your child likely doesn’t make that much money and might not be able to quite swing half of the amount in our made-up out-of-pocket cost: $500 per month. In that case, work it out together and determine how much makes sense for each of you.
Most installment plans will not let your student sign up alone. However, you can connect your student’s bank account to the installment service the college uses for an automatic transfer every month. The most important thing you can do is to make sure your child remembers to consistently keep enough money in her bank account when it’s time for an automatic deduction.
Paying together is a great approach and it can make you both feel satisfied that you’re each contributing toward college costs.
4. Withdrawals occur every month — and you come to expect it.
One of the most effective ways to save money is to automatically whisk the money from your bank account each month — before you get a hankering to spend it.
Same with an installment plan. It’ll automatically be zipped from your bank account each month. The best part is that you can count on it to happen. In fact, a tuition installment payment can feel just like paying a credit card bill on the first of each month or making your monthly mortgage payment.
Maybe there’s even something slightly comforting about paying a bill that you know will arrive each month — okay, okay, maybe that’s a bit of a stretch.
Here’s something to remember, just so it doesn’t take you by surprise: That first payment might be more expensive because of fees.
5. Installment plan fees are cheaper than student loans.
Tempted to reject an installment plan outright because you think you’ll deal with fees or interest? It’s true that tuition installment plans have a small upfront enrollment fee (approximately $100 to $150) but tuition installment plans do not charge interest, so the amount you’ll pay is quite small.
In fact, it’s way less expensive than what you’d pay in student loan interest over time. For example, a Parent Plus Loan disbursed on or after July 1, 2019, and before July 1, 2020, carries a 7.08 percent fixed interest rate. Depending on the amount you borrow and types of loans you choose, a student loan could easily cost you thousands in interest.
It’s so satisfying to pay now instead of worrying about paying the money back later!
Opt for an Installment Plan to Break Down Costs
Now, I know the total I chose to use ($10,000) throughout this blog post may seem way too small. You may face a much larger out-of-pocket cost. However, the monthly payment plan option still shrinks the cost to a much more manageable amount, no matter how you spread it.
Also, that reminds me of more thing that I notice about many families’ college journeys: Some families don’t build a relationship with anyone during the college admission process — they do everything online. They don’t even realize the possibility of a payment plan exists. (See why it’s so important to build those relationships?) It’s never too early to start asking questions and getting to know admission counselors at colleges. Now’s the time to get started with your rising senior!
A tuition installment plan can make college affordable — and better yet, it can help you feel so much better about the cost of college.
Melissa Brock is the founder of College Money Tips and is also the Money editor at Benzinga. She spent 12 years working in college admission, then turned to freelancing and editing. Nothing invigorates her more than writing about college and money and helping families navigate the college search process.