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Payment Plans That Drive Student Success

Key strategies for providing financial flexibility
University Business, September 2017

While students have a variety of options when it comes to paying for college, making unwise financial decisions can lead to negative consequences for the student as well as the institution. Overborrowing, poor planning and budgeting, and misunderstanding financial aid can create seemingly insurmountable debt that can affect academic performance, push students to leave school before completion, and burden them long after graduation.

Institutions can play a role in overcoming these challenges by providing students with flexible, customized tuition payment plans, as well as guidance in choosing the plan that is the best fit for each student. This approach also benefits the institution by simplifying and centralizing payment processes, saving time and money, and freeing up resources that can help to drive institutional and student success.

This web seminar explored the financial challenges that today’s students face, how colleges and universities can help students overcome these challenges, and some key strategies for implementing more flexible payment plans that drive student success at any institution.

Speaker:

Donald Smith

VP of Payments Product Management

Blackboard Transact

Colleges and universities face a significant challenge regarding mitigating the risks of financial hardships for their students. National Student Clearinghouse Research Center data showed that enrollments declined 1.4 percent in 2016 from the prior year and macro-level demographic data on K12 students points to a plateauing of college enrollment for the near future. About one-third of freshmen drop out of school, per a College Advisor analysis, with nearly 40 percent of those citing financial hardship.

Many campuses have worked hard to help students meet their financial obligations. These efforts are extremely important on a human level, but they are also essential from a business perspective. As the total number of college students flattens, the competition for students will become more intense, increasing the cost of acquisition. Therefore, it is essential to maximize retention as a cost-effective alternative to replacing lost students.

One often undervalued tool in this effort is the payment plan. Payment plans afford the student the ability to defer payments over the course of one or more semesters and help avoid high-interest private loans to cover the funding gap between their financial aid award and the total cost of school.

A recent Cashnet survey found that that many students are debt-conscious. Forty-four percent surveyed said they want to attend an affordable school and graduate with as little debt as possible. That’s an encouraging sign for a demographic often chastised in national headlines for a lack of financial literacy. It is also a positive piece of data for advocates of payment plans.

Students overwhelmingly support payment plans as a strategy. Only 9 percent of those surveyed said they had a poor experience with a payment plan. Students appreciate the flexibility that plans allow and often enroll in payment plans semester after semester, showing the importance of such arrangements in the their strategy to avoid additional debt.

The question for many schools is not, “Do I offer a payment plan?” but rather, “What type of approach am I going to take: managed or internally maintained?”

When you’re trying to decide between these two options, it is important to be super honest about your institution’s budget, your employees’ capacity for additional work, and your employees’ core competencies. Are they good at marketing? Are they able to execute the mandatory responsibilities of managing a payment plan?

Regardless of which approach you take, there are several aspects of the payment plan that your team will want to carefully consider.

Before you get too far down the path, you will want to make sure that you meet with your legal team to understand the rules and regulations that pertain to payment plans. Even if there is no associated interest, payment plans are considered an extension of credit. Therefore you will want to understand your legal team’s stance on Regulation Z so that you can properly position any necessary disclosures to maintain compliance.

On top of that, many states have limitations on enrollment fees or late fees associated with the plans, so you will want to make sure you’re adhering to those rules too. If you’re part of a larger system, there may be system-oriented rules that govern payment plans. It is important to understand if this is the case so that you can properly reflect these in your payment plan strategy.

Then the fun starts: choosing the anatomy of your payment plans. The one-size-fits-all approach does not apply here. Students appreciate having options, so you want to think about the number of plans you want to offer. Remember, however, that more plans means more overhead. Try to find the sweet spot between giving your students options while effectively scaling support.

Different software has different capabilities in terms of how to make up the plan balance amount. 

Often you can choose to import an amount from your ERP system, set a fixed amount and have an administrator enroll the payer, or allow the payer to choose their own amount. Consider which of these options best meets the objective for the payment plan you are creating.

Think through key dates for plan enrollment and due dates as well as the number of installments that make up the plan.

It is important to make sure that any business rules for your campus are reflected in your payment plans. What happens if a payer does not meet their financial obligation? Many campuses will restrict the student’s ability to enroll in new payment plans, register for classes or obtain their transcripts until the student has at least had a conversation with the business office. You will also want to create a comprehensive strategy for customer service and exception handling. Who will take calls or answer questions? Which requests are they empowered to fulfil and which require input from a supervisor? Once you have the plans designed and your customer service resources trained, it is time to begin educating the campus community about this useful tool. Identify the resources to drive this activity and the channels they can use to get the word out. Also make sure any student facing resources are educated on your payment plans.

At the end of the day, it is important not to become jaded by your payment plan software. This is an indispensable strategic tool for a person who is working extremely hard to achieve a degree from your institution. As such, it is essential that you understand their opinion of your institution’s payment plans. Ask for feedback so you can ensure you are doing everything you can to effectively support them on their path to student success. 

To watch this web seminar in its entirety, visit www.universitybusiness.com/ws062817

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