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Beware of confusing college tuition payment plans that could result in late fees and increased debt

Book and Student Studying-2178586_640As with many financial transactions these days, college students need to watch out for hidden fees.

Students can get into trouble when entering into agreements with colleges to spread the cost of tuition into several, interest-free loan payments.

Many plans have conflicting disclosures and confusing repayment terms, which put students at risk of missing payments, getting late fees, and piling up debt, a report by the Consumer Financial Protection Bureau found. The tuition payment plans are offered by nearly 450 institutions.

The report also finds that many institutions withhold transcripts from students in order to collect debts, a practice that can harm students starting their careers or finishing their education.

“Tuition payment plans offered by schools may look like a good option, but this report shows student borrowers can end up paying high fees, be forced to sign away their legal rights, or even have their transcript withheld by their school,” CFPB Director Rohit Chopra said in a statement.

Colleges and universities should take a hard look at their repayment plans and avoid subjecting borrowers to high fees or coercive debt collection practices, Chopra said.

Nearly 4 million students each term are in some form of tuition payment plan arrangement with their college.

The report looked at information on tuition payment plans from nearly 450 college websites. It found that 87 percent of the colleges offer the plans directly to students, with 60 percent outsourcing some repayment functions to third-party financial service providers.

Even though these tuition payment plans are usually interest-free, students often are charged tacked-on fees. The report found:

  • 89 percent of schools charge an enrollment or set-up fee, averaging $37 and as high as $250.
  • 60 percent charge a returned payment fee, averaging $29 per transaction with two schools charging $65. These fees are in addition to any nonsufficient funds fees that may be charged by the student’s financial institution.
  • 44 percent charge late fees at an average cost of $46 per late payment. One school charged students $300 for the first late payment.

These fees, when added on to the cost of the tuition balance, can create a high cost of credit, according to the report. When the amount borrowed is low and the enrollment fee is high, students can face annual percentage rates as high as 237 percent.

So college students, like all consumers, need to always be on the outlook for hidden fees.  


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Sadly, they are exposed to the world of hidden fees and high supplementary costs very early in their lives. They have to grow up fast!


Yes, I'm glad the Biden administration is working on hidden fees.

Rebecca Olkowski

I'm so glad my kids are beyond college. My daughter has a lucrative career after majoring in Communications and my son just got his degree in the Air Force.


You're right. College is so much more complicated these days. The student loans are so expensive and the servicing of the loans is often low quality or even exploitive. And, it's a terrible public policy decision that student loans can't be discharged in bankruptcy.

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