“Uh… What? I owe how much?”

That was my friend Sarah’s response to the very kind financial aid lady who walked her through her exit counseling before she graduated from college.

Sarah paid for her entire state university education by herself. When Sarah was younger, a financial planner told her parents, “College will be too expensive when she’s ready to go off to college. I wouldn’t even bother trying to save for it.” 

So they didn’t. The expectation was set: She’d be responsible for every dime, with the exception of an occasional tank of gas to get her back to school.

She took out student loans for everything — housing, meals, tuition. Sarah was in debt to the tune of $80,000 by the time she graduated with her sociology degree.

So, get this. Sarah’s much-younger sister visited my office when I was working in admission. Her sister wanted to forgo the big state school experience and go to a private college — she happened to choose the college where I worked.

As they worked through the financial aid portion of the decision, her parents said, “I wish we’d thought to ask about an installment plan when Sarah was in school.” Things might have been different for Sarah — they admitted that they’d simply been paralyzed by the final out-of-pocket costs and turned to student loans “because that’s how people afford college.”

It’s really, really easy to lean on student loans if you don’t know other alternatives exist. A tuition installment plan can make college affordable. Here’s what you need to know and why they’re awesome.

What’s an Installment Plan?

An installment plan, commonly called a monthly payment plan or tuition installment plan (we called it a 10-month payment plan at the college I worked for) lets you or your student break up the total costs. This means that you can attack the remaining balance and pay it over a typical nine- to 12-month period. 

For example, let’s say your out-of-pocket costs (the remainder after taking scholarships, grants and federal student loans into consideration) total $10,000. This remaining balance can be spread over 10 months — a $1,000 monthly payment.

Makes a $10,000 out-of-pocket remainder seem much more palatable, right?

Some colleges and universities execute their own tuition installment plans but most use outside providers like the ECSI Tuition Payment Plan (TPP), for example.

Most colleges’ installment plans cover only the direct costs billed by and paid to the college, which includes: 

  • Tuition
  • Fees
  • Room and board (only applicable if your child lives on campus)
  • Books, supplies, equipment and transportation to and from school are not covered.

Most colleges or outside providers will accept either a credit or debit card or a savings or checking account at a bank.

Here are some obvious benefits — and some not-so-obvious benefits — on why installment plans are a gift and a great option for many parents.

1. An installment plan might eliminate the need to take on debt.

It’s easy to shut down when you see a large tuition bill. I remember families focusing so much on that final number. “Whaaaa… $10,000?! There’s no way I can pay $10,000 for one year of school!”

And that may very well have been the case. But what happens when you break it down into smaller chunks? We were always asked to help families imagine the possibilities with us. 

“Is it possible to work with $10,000 (or whatever the out-of-pocket amount is) if it’s chopped up?” We’d encourage them to be as creative as possible — cancel some subscriptions, pay off the car or get a side gig to help out. 

Imagine the ways you could break it down into manageable chunks! You might just eliminate the need to take on any debt at all. 

2. You can borrow and pay on an installment plan. 

Still stymied by the idea of paying the full amount on installment? Car payments, mortgage payments, private school tuition, groceries, dog grooming — gah! The costs add up fast. 

It always seems like there’s an extra one-time expense every month at our house. (Last summer, it went like this, in this order: Car repairs! Landscaping! A broken air conditioner!) I know how coming up with any extra money can seem like trying to boil the ocean. 

If the pinch is too much but you know you want to contribute to your child’s college tuition, you can take out a loan such as a Parent Plus Loan (check out my article on how to apply for a Parent Plus Loan in 6 easy steps) or private loans. This could be in addition to opting for an installment plan.

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.

There’s no shame in combining tactics. Think outside the box!

3. You and your child can tackle college payments together.

It may be time to tag-team. Your student may have a job at the local grocery store or waits tables at Applebee’s. You both know you can work together to make the monthly payments. Why not? It can be a “you-pay-half and I’ll-pay-half” scenario. 

Now, most installment plans will not let your student sign up alone. However, you can connect your student’s bank account to the service for an automatic transfer every month. (Just make sure your child remembers to keep the account fully stocked before that payment rolls around!)

Paying together is a great approach and a way for both of you to shoulder the responsibility for your child’s education. If your kiddo doesn’t think he can quiiiiteswing a full half, try to work together to figure out an amount that’s fair. 

4. You can count on it like clockwork.

Making a monthly tuition installment can become as routine as paying a credit card bill every month or making your mortgage payment. Dare I say that there’s something uh… comforting… about paying a bill that you know will arrive each month? 

Remember that the first payment might be most expensive due to fees.

5. Fees are cheaper than student loans.

True, the service fee could add up to three percent to your bill, but an installment plan is still less expensive than diving headfirst into student loans. Tuition installment plans have a small upfront enrollment fee (approximately $100 to $150) and do not charge interest. 

That’s still lower than the majority of student loan interest rates. For example, a Parent Plus Loan disbursed on or after July 1, 2019, and before July 1, 2020 carries a 7.08 percent interest rate. This is a fixed interest rate.

Makes a monthly payment plan look mighty nice, huh?

6. Tuition payment plans offer automatic withdrawal.

One of the most effective ways to save money is to automatically whisk it 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. You might not even notice it — much.

The point is, it’s easier than worrying about paying money back later.

Choose 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. Many families will face much larger out-of-pocket costs. However, the monthly payment plan option still shrinks the cost to a more manageable amount, no matter how you slice it.

Remember my friend Sarah’s story at the beginning? (She’s extremely successful these days, by the way, and student-loan free! She paid off her student loans in a flash, about five years after she graduated from college. She’s amazing.) 

One thing that stood out to me about her college journey was that she and her parents didn’t build a relationship with anyone during the college admission process — they did everything online. They didn’t even realize the possibility of a payment plan existed until her little sister went off to college. (See why it’s so important to build those relationships?)

Today, my friend is a huge advocate for talking things through as a family and trying to be creative when reducing costs. She wishes she and her parents would have read through how to handle a disappointing financial aid award before she went off to college, or at least thought through implications of every single option available. 

A tuition installment plan can make college affordable — and can even help you feel so much better about the cost of college.

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