The Hidden Price of Paying Tuition

One of the ways that college costs increase may be related to attempts to actually make college more affordable. According to an op-ed in the New York Times by Noah Bernstein:

In the past, families and students covered their tuition with lump payments at the beginning of each semester. To ease the burden of such large bills — recent data shows that tuition and fees have increased 439 percent from 1982 to 2007 — many colleges have instituted monthly payment plans, while charging zero interest. Even many families that could afford to pay an entire semester upfront find such plans appealing.

Though such plans have undoubtedly allowed a greater number of modest-income students to go to college, they can actually end up unintentionally raising tuition costs. While the plans typically don’t charge a fee for payments made by check or direct deposit, they tack on a hefty charge for credit card payments.

Of course it’s not really tuition; it’s the extra fees people pay in order to pay tuition. These extra fees don’t go to educate (or clothe, feed, and house) students. This money doesn’t even go to the colleges these students attend. The fees go to outside companies.

The companies have contracts with American colleges to process tuition payments. Colleges pass the costs of these contracts back to students and their families.

As Bernstein explains, the total cost of tuition, room, and board at Amherst College, for instance, is $53,370 a year. Even relatively affluent people can’t easily manage to shell out $53,000 at one time. And so Amherst uses a company called Tuition Management Systems to help make tuition payments more affordable.

But TMS charges a 2.99 percent fee for every credit charge transaction. That’s $1,595 a year.

Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer