There are 18 million college students, 40 percent of whom receive federal financial aid every spring and every fall. The average student, after class drops and other adjustments, gets 2.5 refunds totaling $1,300. That's a lot of money and a lot of transactions that have to be made according to a stringent set of regulations.
Automated tuition credit balance refunding, with its demanding security regulations, complex IT integration and unwanted media scrutiny, might seem like a responsibility with a lot of "must do's." Yet for those who have mastered it, it's a story of "can do's" with a repurposed bursar's office staff.
Kathy Woods is the Bursar at Texas Woman's University. In 2005, her department was still cranking out paper checks and suffering from the staff-stressing, tedious seasonal ramp-up known as tuition refund time. They suffered from the familiar manual exercise of calculating credit balances, issuing checks, dealing with the endless telephone inquiries of "where's my check" and long lines of irritated students. Meanwhile, the student population of 14,000 was doubling. Her staff of five was not.
To her rescue came automated refund management. In this case, in the form of Higher One, although today, college and university campuses seeking refund management services have several vendors to consider.
Lewis University (Ill.) Bursar Pam Maciulewicz switched to Sallie Mae's ACH system in September 2009. The value to her students is obvious. The office runs the report on a Monday, and students have their money direct deposited to their checking account by Wednesday. The value to the department is also obvious. "Students called the office repeatedly. 'Have you processed my check?' 'Can I get my check early?'" she recalls. "Once the new system was put in place, e-mails began going out telling students their money was in their account, and the calls stopped."
The Lewis business office uses e-bill, online payments, and other automated accounting functions, as well. Staff members that used to be saddled with repetitive clerking functions are now free to do other, more high-value tasks and projects. "The [job of the] bursar's office used to be 'here's your bill,' then 'pay your bill.'" Maciulewicz reconfigured the staff and now has two student account counselors working with families to solve problems stemming from their unique situations.
Refund management—the usually innocuous step in the revenue cycle—is about to become a bigger deal. Several forces have increased pressure on bursar's offices everywhere. For those schools that still manually process refunds and print and mail paper checks, life is going to get harder, for four basic reasons.
- The need for cost avoidance. Do more with less is an all too familiar refrain. The problem is compounded by the semiannual ramp-up required to manage the two waves of refunds. How do you staff for such wild swings in labor demand? Work study students are not a good source of labor, given the sensitive nature of their colleagues' student records and financial information.
- More federally financially aided students. With increasing tuition and decreasing family income, more students receive financial aid. There's an ever-increasing number of Title IV recipients resulting from the shift from private lenders to direct lending.
- A more demanding customer. Students want more choices, more convenience, more coddling ... all at no incremental cost. What is good for the efficiency of the bursar's office has not always been good for the customer service desires of a student body.
- A trickier data security compliance regime. Colleges with their natural tendency for openness and access are extremely vulnerable to data thieves and other ne'er-do-wells. While Payment Card Indusry (PCI) compliance regulations have been in place for some time, there are newer and tougher ones, and there's more scrutiny of protective measures against identity theft and liability for breaches.
For schools with a high number of Pell Grant recipients, there's a new kicker beginning July 2012. David Bergeron, the acting deputy assistant secretary for policy, planning, and innovation in the federal Office of Postsecondary Education explains, "There is a limited provision that a school must provide a way for a Pell Grant-eligible student to receive credit balance funds by the seventh day of a payment period to be able to buy books and supplies. It would generally apply most to low-cost colleges where federal aid is greater than tuition and fees, but it applies to any college where this is the case." The current window is 14 days. That extra week allowed for a lot of inefficiency—but not anymore.
With automation comes new responsibilities. The PCI Data Security Standards (PCI DSS) were created by a consortium of financial services companies to assure the integrity of data being handled through their credit card network. The standards also apply to any institution that stores, processes, or transmits a primary account number. Security consultant Walt Conway of 403 Labs says PCI is nearly impossible to avoid, given the number of transaction types on campus—tuition payments, books, dining and laundry services, and tickets to the big athletic event of the week. Online payment, card terminals, telethon donations, and one cards are all included in the scope of the regs. New standards require hardware containing sensitive personal information to be identified and scrubbed. Add to this the enhanced PCI PA-DSS that requires software developers, including those that patch your ERP systems or do workarounds, to comply with their own set of security regs.
In most colleges, the responsibility rests with the treasurer or controller and typically includes the IT team. There are consultants and third-party sources willing to take on parts of the portfolio. The Treasury Institute for Higher Education was formed about 10 years ago by Dennis Reedy at Indiana University. It offers symposia and two- and three-day courses on PCI compliance management. NACUBO likewise provides training. While not easy to comply, it is not impossible either.
Electronic transactions trump paper checks, hands down. The ACH (Automated Clearing House) electronic funds transfer, directly to the student's checking account, is currently the preferred method. It is relatively easy, secure, cheaper, and faster—it saves three to five days in the mail.
A newer device has come to market in the past decade with a degree of success: the debit card. Refunds are electronically added to a student's account and can be used for transactions at any merchant that takes MasterCard or VISA or has a card swipe terminal. Many of these cards are cobranded by the school and MasterCard. Some double as a one card for student ID, building access, and dining privileges, etc.
Proponents of this approach cite the savings to the college over the paper check process, which can cost $20, or as much as $40, per student. They also say that this works for nearly all students, including those who are "unbanked," meaning someone who doesn't have a checking account can't take an ACH deposit. Students like the convenience and speed at which they get access to their funds.
Detractors say it is illogical to make the 92 percent of students take a debit card (and bank account it's connected to) they may not want to accommodate the 8 percent of students who are unbanked. The real issue, however, is students' exposure to fees. Some vendors charge ATM usage or inactivity fees. Charging students a fee to get access to their student loan money is offensive to many. Indeed, there has been negative press in USA Today and the Washington Post, for instance. New York Governor Andrew Cuomo, formerly attorney general, a force to be reckoned with in the financial aid office, has been inquiring. U.S. Department of Education regulations specifically require that students not be charged a fee for accessing their own money.
The debit card concept was pioneered by Higher One. Administrators at Higher One client schools acknowledge the potential for fees, but note that the vendor actively instructs students how to avoid fees and has even amassed a significant library of free financial literacy tools to teach students money management. There's even an interactive game to engage students. Others have noted that banks often charge students for checks and fees of various sorts. Students without local bank accounts are at the mercy of check-cashing services that charge exorbitant fees.
Early adopters of automated refunds in general and debit cards in particular ran into problems with parents, students, and their own administrations. Change is hard for everyone, even if it makes things better. Parents balked at giving their kid a "credit" card, even though it wasn't one. Administrators worried about attaching the school's brand to a third-party vendor. Fearing lack of control, IT departments and business offices cringed at giving sensitive data to a vendor.
In the beginning, Woods herself was a naysayer. Now a believer, she says the key is convincing students and their families that the change is for their benefit: faster, better access to funds; safe, secure transactions; compliance; efficiency; and customer service.
There are exceptions that justify the paper check. Texas Woman's University has many Mexican students who do not have permanent U.S. addresses and cannot open a checking account. Parents receiving refunds for Plus loans don't want a debit card; they want the cash, direct deposited or in paper form. Furthermore, regulations say schools have to offer a paper check option.
The market is maturing, and more vendors, including Nelnet Business Solutions, are adding the debit card option. Expect refund and e-payment functions to be added to the campus one card currently being used for student ID, building access, dining, etc. The education department is suggesting that. "We encourage innovative ways, like the use of stored-value cards, to get funds to students more rapidly and without added expenses," reports Bergeron. "With that said, students should be fully apprised of and understand the terms and conditions imposed by card issuers to avoid fees and penalties."
Look for new features tied to student checking/debit accounts that offer convenience, access, and control. Sallie Mae will be offering an FDIC-insured account with no minimum balances and no low balance or inactivity fees. Students will be able to make no-fee withdrawals and balance inquiries through a 40,000 ATM-network via Allpoint. Banking services include bill pay, check writing, transfers, and links to other bank accounts, and SMS text messaging.
Mobile applications from Higher One, TouchNet, Sallie Mae, and others will offer students access to accounts, facilitate transfers, even optically scan checks for deposit remotely without an ATM or branch nearby. Bursar and business office staff can view history and direct activity from anywhere.
There are no readily available statistics to indicate the number of schools or students being serviced with paper checks. Vendor marketing departments think that as many as half are still operating with no or limited automation. For administrators at those institutions who may be contemplating a switch, experienced bursars and category experts offer these tips:
- Get buy-in at the top levels
- Involve IT and the business office
- Bundle it with other automated business processes, i.e., e-bill, e-payment, cashiering, etc.
- Carefully integrate it with the ERP platform
- Actively market it to students and families
- Stress the benefits: access, communications, control, convenience, low or no cost
- Use multiple channels frequently: orientation, e-mail, website, social media, snail mail for parents
- Choose a reliable partner that has proven experience in the college space
If this sounds scary, take heart. Bruce Boyer, the bursar at Columbia College (Mo.), doesn't understand why schools get worked up about this technology and security compliance, or even feel the need to outsource the functions. Columbia has two traditional semesters, plus eight two-week sessions, 30,000 online students, and multiple campuses in different states. In essence, dispersesfunds every week of the year. He manages it all using TouchNet's software running with a Datatel ERP. "Two weeks ago, we distributed $18 million to 9,000 students. It took two hours max," he says.
While many institutions that have adopted automated refund management would not likely go back, there are institutions at which the trend hasn't yet caught on that are still using paper checks. Cathy Foland, the bursar at Southern Illinois University, Edwardsville, says she plans to switch to an ACH-based refund distribution. But she has to wait for limited IT resources to become available. "We just implemented an ACH payment system," she reports. "ACH refunds are next."
Tom Robinson is a freelance writer specializing in higher education. He resides in St. Augustine, Fla., and Charleston, S.C.