CONSUMER FINANCIAL PROTECTION BUREAU | SEPTEMBER 2023
Tuition Payment Plans
in
Higher Education
Table of contents
Executive summary ..................................................................................2
1. Market overview .................................................................................. 6
1.1 Direct lending by colleges.....................................................................................6
1.1.1 Colleges as lenders................................................................................................. 6
1.1.2 Loan amounts...................................................................................................... 10
1.1.3 Plan terms and number of installments.................................................................. 11
1.1.4 Fee structures .......................................................................................................12
1.1.5 Contract terms......................................................................................................14
1.2 Third-party private installment loans ...............................................................15
2. Consumer risks................................................................................. 17
2.1 Inconsistent disclosures......................................................................................17
2.2 Automatic enrollments and forced use.............................................................20
2.3 High costs related to late payment....................................................................23
2.4 College debt collection practices.......................................................................27
2.5 Waivers of consumer rights...............................................................................29
3. Conclusion........................................................................................ 31
Appendix A: Tuition payment plan dataset methodology and
descriptive statistics .........................................................................32
A.1 Methodology......................................................................................................32
A.1.1 Sample construction............................................................................................... 32
A.1.2 Variables................................................................................................................ 32
A.2 Descriptive statistics .........................................................................................33
Appendix B: Glossary...........................................................................34
CONSUMER FINANCIAL PROTECTION BUREAU 1
Executive summary
Many Americans have their first experiences with lending, debt collection, and credit reporting
while in college. While federal student loans from the U.S. Department of Education and private
financial institutions are the major ways in which students borrow, this report examines a
financial product that is less familiar to many students and families: a tuition payment plan.
Many colleges allow students to pay for postsecondary education in installments using tuition
payment plans. When colleges do so, they allow students to obtain their education now and pay
for it over time; in other words, they become lenders. While tuition payment plans are generally
marketed as alternatives to loans, many tuition payment plans should be understood as at a type
of loan. Typically, these plans allow students to spread the cost of tuition and other educational
expenses across several payments over the course of a single semester or term.
These tuition
payment plans vary and may be paid in as few as two to four installments or in many
installments stretching beyond the length of one year.
Products marketed as tuition payment plans have a wide range of product structures. School-
provided payment plans may be managed by the schools or administered by third-party
payment processors (e.g., Nelnet, Transact, or TouchNet). Typically, tuition payment plans are
interest-free, but colleges (along with the third-party service providers that facilitate payments)
commonly charge enrollment fees, late fees, and returned payment fees.
This report builds on the CFPB’s recent work including a report on deposit and credit products
offered by colleges or in college settings;
1
recent supervisory examinations of institutional
student lenders;
2
publications on buy now, pay later (BNPL) products;
3
and other work on
products offered by trusted intermediaries.
4
The wide variation in terms that are offered by tuition payment plans, and the terminology that
schools use to describe them, may confuse consumers about the nature of the financial
1
Consumer Financial Protection Bureau, College Banking and Credit Card Agreements: Annual Report to Congress,
(Oct. 2022), https://files.consumerfinance.gov/f/documents/cfpb_college-banki ng-report_2022.pdf.
2
Consumer Financial Protection Bureau, Supervisory Highlights: Student Loan Servicing Special Edition Issue 27,
Fall 2022, (Sep. 2022), https://files.consumerfinance.gov/f/documents/cfpb_student-loan-servicing-s upervis ory-highlights-
special-edition_report_2022-09 .pdf.
3
Consumer Financial Protection Bureau, Buy Now, Pay Later: Market Trends and Consumer Impacts, (Sep. 2022),
https://files.consumerfinance.gov/f/documents/cfpb_buy-now-pay-l ater-market-trends-consumer-
impacts_report_2022-09.pdf.
4
Consumer Financial Protection Bureau, (May 2023), Data Point: Pitfalls of Medical Credit Cards and Financing
Plans, https://www.consumerfinance.gov/data-research/research-reports/medical-credit-card s-and-financing-
plans/.
CONSUMER FINANCIAL PROTECTION BUREAU 2
arrangement they are entering into. For instance, some schools market tuition payment plans as
an alternative to student loans.
5
Further, information about fee levels and terms are often
spread across several different documents and/or webpages, which may make it difficult for
consumers to find complete information. Overall, these practices could obscure the nature of the
product, the cost of credit, and what entity owns or services the product.
6
And because tuition
payment plans are often offered to students by their schools after they have already enrolled, the
circumstances might result in a captive market in which students may not be able compare the
products to other options.
To assess the types of installment loan plans that are offered directly by colleges, the CFPB
performed a review of nearly 450 college websites to gather publicly available data on tuition
payment plans and related contracts.
7
In addition to the review of school and program websites
and contracts, the CFPB analyzed consumer complaints, met with industry participants, and
conducted interviews with current consumers.
8
Findings include:
• Almost all colleges offer some sort of tuition payment plan, and millions of
students use this product each year: Existing research suggests that as many as
98 percent of colleges offer tuition payment plans,
9
and the CFPB estimates that up to
3.9 million borrowers might use them each term.
10
5
While some tuitionpayment plans are marketed this way, many tuition payment plans are consideredprivate
student loans under the Truth in Lending Act (TILA), although whether and how different disclosure regulatory
requirements may apply depend on each tuition payment plan’s individual features. See section 2.1. See, e.g., Transact
Holdings Inc., 2022, Payment Plans: An alternative to student loans,
https://transactcampus.com/resources/infographics/request/an-easier-way-to-p roce ss-payment-plans
. Accessed
January 11, 2023.
6
In interviews conducted in March 2023 with current students, the CFPB observed that some students did not
understand that some tuition payment pl ans could be forms of credit, and some did not understand thatthe tuition
payment plan they were using was offered by theirschool and not by the federal government. Others thought that a
tuition payment plan was simply a plan to repay their federal student loan debt.
7
Data collection occurred from December 2022 to April 2023. This report presents new data and analysis to build
upon the analysis conducted for the CFPB’s 2022 college banking report. For more information on that report, see
Consumer Financial Protection Bureau, College Banking and Credit Card Agreements: Annual Report to Congress,
(Oct. 2022), https://files.consumerfinance.gov/f/documents/cfpb_college-banki ng-report_2022.pdf
.
8
Id.
9
The National Association of College and University Business Officers (NACUBO) estimated that 98 percent of
public and private non-profit col leges offer tuition payment plans. This estimate is based on a survey conducted
between October and December 2019 and included data from 454 public and private nonprofit colleges and
universities. NACUBO, 2019 Student Financial Services Policies and Procedures Report
.
10
CFPB estimates that 20 to 25 percent of students use payment plans at schools that offer them b ased on d i scu ssions
with market participants. Based on this utilization rate estimate, NACUBO’s estimate of the percent of colleges
offering TPPs (see supra note 10), and total undergraduate e nrollment (at schools participating in the Title IVfederal
aid program)data from College Scorecard, the CFPBestimates that 2.9 to 3.9 million students use a payment plan
each term. U.S. Dep’t of Education, (Sep. 14, 2022), College Scorecard, https://collegescorecard.ed.gov/data
. Data
used for this analysis was last updated in September 2022 and reflects enrollment totals from Fall 2020.
CONSUMER FINANCIAL PROTECTION BUREAU 3
• The CFPB observed varied and sometimes inconsistent disclosure of t erms
and conditions: Unlike traditional private education loans, which are subject to a
common set of disclosure requirements stipulated under federal law,
11
disclosures of
tuition payment plan terms and conditions can vary widely. In part, this may be
because the tuition payment plan label can encompass a wide range of product
structures, and the plans may differ with regard to the duration of the contract and the
number of payments required, in addition to other terms, which may impact a school’s
disclosure obligations. In other cases, similarly structured products are disclosed
differently.
• The CFPB observed terms and conditions that may allow automatic
enrollments and forced use: In some cases, borrowers may become enrolled in a
tuition payment plan without knowingly signing up for one or because institutional
disbursement practices of students’ federal student loan funds may create a situation
where a student is unable to meet the school’s tuition deadlines without enrolling in a
payment plan.
12
When these situations occur, the use of the product could lead to fees
and financial difficulties for students.
• Some colleges may impose high costs when students miss payments: Based
on the fees in the tuition payment plans reviewed by the CFPB, the average amount of
a late payment fee is $30. However, it appears that in some cases, late fees can be over
$100 per missed payment, and in other cases, some colleges may charge late and
returned payment fees on the same transaction. The CFPB also observed terms that
may allow colleges to convert no-interest payment plans into interest-bearing loans
when payments are missed.
13
These practices can lead to a high cost for late payment
on tuition payment plans.
11
See 12 CFR §§ 1026.46-48; 34 CFR part 601. Generally, private student loan disclosure requirements can cover
arrangements that schools label as “tuition payment plans” if the arrangements meet the definition of “private
education loan” under 12 CFR 1026.46(b)(5). However, there is an exception to those requirements for such plans
that do not charge interest and the term of the extension of credit is one year or less. See id. Even if the exception
applies to a specific tuition payment plan, though, the plan may still be subject to other disclosure requirements for
closed-end credit, as also discussed in Section 2.1.
12
See, e.g., Arizona State University, Tuition and Aid Webpage (accessed Apr. 23, 2023),
https://tuition.asu.edu/billing-finances/payment-plan#we bsp ark-anchor-li nk--19. This website states that “If you
have outstanding charges of $500 or more after the payment deadline, you’ll be automatically enrolled in the ASU
Payment Plan and be billed an ASU Payment Plan fee [of $100 for resident students or $200 for nonresident
students].” See also, e.g., Oklahoma Community College, Bursar Webpage, (accessed Jan. 11, 2023),
https://www.occc.edu/bursar/. This website states that “If you miss your designated due date for an in-full payment, we’ll
automatically place you on a monthly payment plan that lets you pay off your tuition and fees over time. The payment
plan incurs a $25 set-up fee per term.”
13
See, e.g., Franklin University, Tuition Payment Plans & Options Webpage, (accessed Apr. 23, 2023),
https://www.franklin.edu/tuition-financial-aid/payment-options. This website states that “There is a 7 day grace
period for all balances; thereafter past due balances are subject to an 18% APR finance charge.”
CONSUMER FINANCIAL PROTECTION BUREAU 4
• At least one in three colleges reserve the right to withhold transcripts as a
debt collection practice, and students may be subject to other intrusive
forms of debt collection: Once an unpaid balance is sent to collections, the
borrower may become subject to transcript withholding, which under certain
circumstances the CFPB has found to be an abusive act or practice.
14
Additionally, in
some cases, students could risk removal from classes, meal plans, and campus housing
when they miss a payment on a tuition payment plan.
15
In some cases, these
consequences may be more severe than students might face if they used a different
option to cover tuition, such as a federal student loan, a private student loan, or even
general-purpose financial products like credit cards.
16
• Some contracts and agreements purport to waive certain consumer rights:
Some contracts and agreements related to student financial obligations, including
tuition payment plan contracts as well as enrollment and student financial
responsibility agreements, include terms and conditions that purport to waive
consumers’ legal protections or limit how consumers can enforce their rights. In some
cases, important terms and conditions may be included in contracts that are signed
only once when a student initially enrolls in the school and may not be re-disclosed at
the point-of-enrollment for the payment plan.
14
Consumer Financial Protection Bureau, Supervisory Highlights: Student Loan Servicing Special Edition Issue 27,
Fall 2022, (Sep. 2022), https://files.consumerfinance.gov/f/documents/cfpb_student-loan-servicing-s upervis ory-highlights-
special-edition_report_2022-09.pdf, at 8.
15
See, e.g., Rivier University, Payment Policies Webpage, (accessed May 25, 2023),
https://www.rivier.edu/financial-aid/student-resources/payment-policies/. This webpage states that students who
pay late may be subject to a late payment penalty, the accrual of interest on unpaid balances, deactivation of their
campus ID cards, residence hall dismissal, suspension of meal plan, suspension of participation with athletic teams,
and more.
16
The CFPB recommends that students consider federal student loans first and does not recommend that consumers
use credit cards to pay for college. It can be a much more expensive way to finance an education and credi t cards do
not provide the flexible repayment terms or borrower protections offered by federal student loans. See, e.g.,
Consumer Financial Protection Bureau, Paying for College: Choose a loan that’s right for you, (accessed Aug. 27,
2023), https://www.consumerfinance.gov/paying-for-college/choose-a-student-loan/
.
CONSUMER FINANCIAL PROTECTION BUREAU 5
1. Market overview
This market overview is based on a mixed-methods analysis that uses both quantitative and
qualitative data. The CFPB collected and analyzed publicly available information on tuition
payment plans from nearly 450 college websites during the period from December 2022
through April 2023. The sample used in this report is the same sample of colleges used in the
CFPB’s 2022 college banking report,
17
and all quantitative analysis in this report is based on this
data, unless otherwise noted. To add a qualitative overlay to our data analysis, we also reviewed
consumer complaints submitted to the CFPB and the Department of Education (ED), met with
industry participants, and conducted interviews with consumers using tuition payment plans.
1.1 Direct lending by colleges
While tuition payment plans offered by colleges differ in structure across schools, they tend to
have a number of similar features. This section explores features including average loan
amounts, plan length and number of installments, fee structures, and contract terms.
1.1.1 Colleges as lenders
Many colleges allow students to pay for postsecondary education in installments using tuition
payment plans. When colleges do so, they allow students to obtain their education now and pay
for it over time; in other words, they become lenders.
18
While tuition payment plans are
generally marketed as alternatives to loans, many tuition payment plans should be understood
as at a type of loan. These plans may help students pay tuition out of pocket or bridge the gap
between the financial aid they have been offered and the total cost of attendance. For colleges,
these plans may boost enrollment and generate income.
19
In the 2022-2023 academic year, we found that roughly nine in ten schools in our sample that
participate in the federal student aid program (referred to here as “Title IV” schools) appeared
to offer tuition payment plans to their students, meaning that the school allows the tuition bill to
be deferred and the student to pay the bill in installments.
20
Other estimates, including one
17
Data collection occurred from December 2022 to April 2023. See Appendix A for more information on the
methodology used in this report.
18
See, e.g., 12 U.S.C. § 5481(7).
19
Turner, M.L., “The Payment Plan: Managing and marketing tuition installment plans for the benefit of students,
families, and the institution,” University Business (Oct. 2012).
20
See supra note 18.
CONSUMER FINANCIAL PROTECTION BUREAU 6
based on industry-wide survey data from 2019, suggest that as many as 98 percent of Title-IV
schools offer payment plans.
21
Using this industry estimate and undergraduate enrollment data,
the CFPB estimates that as many 2.9 to 3.9 million students use a payment plan each academic
term.
22
Over 60 percent of the schools offering installment products appear to outsource some functions
to third-party financial service providers.
23
Among this group, three large service providers
appear to administer almost all of the plans: Nelnet, Transact, and TouchNet (Figure 1). These
companies primarily provide software that allows schools to embed tuition payment plan
processing functionality into existing systems such as online “student portals” – and in some
cases, they also provide payment processing services via a partner bank, such as Wells Fargo and
U.S. Bank.
24
In some cases, third-party providers may also offer to fulfill certain compliance
responsibilities on behalf of the university.
25
While some schools provide information to
students about the third parties involved in their tuition payment plans,
26
others may not use
third parties or not disclose these arrangements to students.
27
21
National Association of College and University Business Officers(NACUBO), 2019 Student Financial Services
Policies and Procedures Report, https://www.nacubo.org/research/sfs%20benchmarking%20report, at 7.
22
See supra note 11.
23
This appears to be consistent with NACUBO’s 2019 survey findings (b ased on a survey conducted between October
and December 2019including data from 454 publ ic and private nonprofit col leges and universiti es). See supra note
22.
24
Three out of the four largestservice providers are structured as independent sales organizations, or ISOs (Nelnet),
or subsidiaries of ISOs (TouchNet and Transact). ISOs provide front-end, customized services to a client population
(e.g., payments software to colleges and universities, etc.) and sell their partner bank’s merchant accounts, through
which the client would set up their payment flow. This benefits the partner bank by bringing additional payments
through the bank that can generate revenue (e.g., acquirer mark-up fees or ACH transaction fees). Where TPP third-
party service providers are subsidiaries of ISOs, the third-party provider may not require theschool to use that ISO or
partner bank for payment processing. The other large service provider, Flywire, is not an ISO – and in cases where it
processes payments, it does so via its own merchant account at a bank.
25
See supra note 20. See also, e.g., TouchNet, Compliance Webpage, (accessed Aug. 27, 2023),
https://www.touchnet.com/merchant-services/compliance. This website states that “Achieving and maintaining
compliance is a significant undertaking, especially given the size and complexityof today’s campuses and the multiple
payment points, methods, and channels involved. Our U.Commerce software solutions are compliant and built to stay
compliant as standards evolve. By protecting sensitive data, we reduce scope, compliance overhead, and regulatory
paperwork, giving you peace of mind that comes from having a secure, end-to-end compliance solution in place.” See
also, e.g. Nelnet Campus Commerce, Long-Term Payment Plans Webpage, (accessed Aug. 27, 2023),
https://campuscommerce.com/payment-solutions/long-te rm-p ayme nt-p lans/. This website states that “We manage
disclosures so you don’t have to. Maintaining compliance with HEOA and TILA can be costly and time-consuming.
Nelnet relieves this burden from your business office, giving you more time to do what you do best – support student
needs.”
26
See, e.g., Fort State Valley University, Nelnet Payment Plan FAQs, (accessed Apr. 26, 2023),
https://www.fvsu.edu/paymentp lan. See also, e.g., Georgia Southwestern University, Nelnet Payment Plan,
(accessed Apr. 26, 2023), https://www.gsw.edu/student-account/ne lnet-payme nt-plan.
27
Some third-party providers, including TouchNet and Flywire, offer tuition payment plan software as a “white-label”
product, using the col lege’s branding rather than the third-party’s branding. Colleges with these providers may be
more likely to fall into the “No Provider Found / IHE” designation.
CONSUMER FINANCIAL PROTECTION BUREAU 7
FIGURE 1: PROVIDER DISTRIBUTION, FOR SCHOOLS WITH PAYMENT PLANS
Schools were marked as having “No Provider Found / IHE” in cases where the CFPB observed the presence of a
tuition payment plan but could not identify a third-party service provider. In these cases, the school may administer
the plan directly or there may be a service provider that is not publicly identified. The “Small Provider” designation
indicates that a third-party service provider was identified and services two or fewer schools.
Financial relationships between schools and third-party service providers can differ. Schools
typically pay the service provider an annual licensing fee for the use of the software and/or may
also pay fees per transaction if the service provider is involved in the payments flow (Figure 2).
Schools sometimes pay these fees on behalf of their students and other times pass these fees
directly onto the consumers.
28
In some cases, the third-party providers may also receive a
portion of fee revenue, with the school also retaining a portion. The CFPB identified third-party
service providers in its sample that received fee revenue based on enrollment fees,
29
late and
28
Throughout the data collection, the CFPB found that schools typically cover ACH fees but pass along transaction
fees on cards to students.
29
See, e.g., Dutchess Community College, (Apr. 2019), Setting Up a Payment Plan YouTube Tutorial, (accessed Apr.
26, 2023), https://www.youtube.com/watch?v=K3MGHqLGdmE. This payment plan enrollment tutorial video
noted: “$25 of this [enrollment] fee is retained by Nelnet Campus Commerce for proving the software and support
necessary to administer your plan. The remainder of the fee is remitted to your institution.” See also, e.g., Victor
Valley College, (Jun. 2018), Video Tutorial: How to Set Up Your Payment Plan, (accessed Apr. 26, 2023),
https://www.vvc.edu/fees-refunds.
CONSUMER FINANCIAL PROTECTION BUREAU 8
returned payment fees,
30
and transaction fees.
31
Third-party service providers may also earn
interest on any balances that they hold before remitting to the appropriate school.
32
FIGURE 2: EXAMPLE TUITION PAYMENT PLAN MODEL
30
See, e.g., University of Wisconsin – Stevens Point, Pay My Bill Webpage,
https://www3.uwsp.edu/SFS/Pages/Pay-My-Bill.aspx. This website states that “If you enroll in a payment plan but
you do not mak e i nstallment payments by the due date, you will be sub ject to l ate fees assessed by UW-Stevens Point
and Transact Payments separately.” It also says that if electronic checks are returned, a $25 charge “will be assessed
by Transact Payments [and additionally the payment] by NSF check will be treated as nonpayment of tuition and fees
and a $75.00 administrative fee may be added to your account.”
31
See, e.g., University of Pennsylvania, Penn Payment Plan Webpage, (accessed Apr. 26, 2023),
https://srfs.upenn.edu/billing-payment/penn-payme nt-plan. This website states that: “Our vendor...assesses a 2.85%
convenience fee on credit card payments.”
32
See, e.g., Nelnet, 10-K Annual Report, (Feb. 28, 2023), https://d18rn0p25nwr6d.cloudfront.net/CIK-
0001258602/760b5395-99df-474d-87da-7ba1fc76031d.pdf, at pages 10-11. In 2022, Nelnet reported almost $9.4
million in net interest income on tuition funds held in custody for schools and states that “Nelnet Bank ’s deposits are
interest-beari ng and consist of…intercompany deposits [among other sources].… The intercompany deposits are
deposits from the Company and its subsidiaries…[including] NBS custodial deposits consisting of tuition payments
collected which are subsequently remitted to the appropriate school.”
CONSUMER FINANCIAL PROTECTION BUREAU 9
In certain cases, federal regulations apply when schools recommend financial products to
students, in recognition of the critical role that colleges play as trusted sources of information
for their students.
For instance, when colleges recommend deposit accounts, private student
loans, or credit cards to students, various regulations govern the process to ensure that schools
disclose their financial interests to students.
33
However, these requirements do not apply to all
types of financial products, and some tuition payment plans may fall outside of the scope of
these regulations.
Further, state law can also impact disclosure obligations.
34
1.1.2 Loan amounts
Because colleges and private lenders rarely report publicly on their installment plan portfolios
and because tuition payment plans may be reported differently by different schools, data on
tuition payment plans is limited and the average size of tuition payment plans is unknown.
Available sources of data suggest that the amount students may take on through tuition payment
plans can reach into the thousands of dollars and that the loan amounts can also vary widely.
For instance, the State of California’s Department of Financial Protection & Innovation collects
information from licensed private student loan servicers about state and national retail
installment contract volumes under the state’s Student Loan Servicing Act.
35
According to this
reporting, California’s licensees had over 40,000 retail installment loan contracts in the state
representing almost $215 million outstanding at the end of 2022.
36
Although it is not clear
whether all tuition payment plans reviewed for this report would meet California’s retail
installment loan contract definition, these data indicate that for tuition payment plans meeting
that definition and reported by licensed providers in California, such plans have an average
33
See, e.g., Regulation Z, 12 CFR part 1026, subparts C (regarding closed end credit), F (regarding private student
loans) and G (regarding open-end credit offered to col lege students). See also 34 CFR part 601 (regarding school and
lender requirements for private and federal education loans); id. at 668.164 (disclosures related to certain campus
financial account arrangements). The Truth in Lending Act also prohibits private student loan lenders from directly
or indirectly offering or providing any gift to a school in exchange for any advantage or consideration provided to the
lender related to its private student loan activities and from engaging in revenue sharing with a school. 15 U.S.C.
1650(b).
34
Some states are considering regulations that would explicitly provide that education financing products, including
but not limited to installment contracts, qualify as private student loans under existing state regulations. See note 39.
35
See Cal. Fin. Code § 28100 et seq. The definition of “retail installment contract” is provided at Cal. Civ. Code §
1802.6 (2022). The California Department of Financial Protection and Innovation recently proposed an updated
definition. See, e.g., California Dep’t of Fin. Prot. & Innovation, (Jan. 6, 2023), Proposed Regulations Under the
California Consumer Financial Protection Law, available at
https://dfpi.ca.gov/wp-
content/uploads/sites/337/2023/03/PRO-01-21-TEXT.pdf?emrc=cf5bce.
36
California Department of Financial Protection & Innovation, Annual Report of the Student Loan Ombudsman for
2022, (July 2023), https://dfpi.ca.gov/wp-
content/uploads/sites/337/2023/07/StudentLoanOmbudsman_AnnualReport.pdf, at 26.
10 CONSUMER FINANCIAL PROTECTION BUREAU
installment loan size of roughly $5,300.
37
However, this data point is limited because it relies on
data submitted only by private education loan servicers licensed in the State of California about
relationships with consumers in the state. It also excludes installment contracts that are serviced
by non-licensed providers such as public schools, products that may not fit the definition of
retail installment loan under California law, and contracts not reported by licensees.
38
Other estimates, based on data sources assessing all debts students owe to their institutions—of
which tuition payment plans can be considered one type—suggest that the average amount could
also include relatively low balances. According to the most recent National Postsecondary
Student Aid Survey, institutional loans received (by students who received that type of loan)
ranged from $10 to almost $37,000 (with an average amount just over $4,000).
39
Another
estimate based on institutional debts at select colleges in California suggests that average
institutional debts could be significantly lower (around $525), but these data sources may not
include tuition payment plans and thus may not reflect balances owed on these products.
40
1.1.3 Plan terms and number of installments
Almost all payment plans observed by the CFPB are structured to cover a student’s tuition and
other expenses for a single academic term (e.g., semester or quarter) and typically require
borrowers to pay off their outstanding balance in three to six installments.
41
Installments are
typically equal in size, with the exception of the first payment, which generally also includes the
full enrollment fee. Installment amounts also automatically adjust throughout a student’s term
37
This calculation takes the dollars outstanding in the retail installment contract portfolio ($214,195,000) and
divides by the total number of borrower relationships (40,238) to arrive at an average loan amount of $5,323.
38
See State of California, Dep’t of Financial Protection & Innovation, Directory of Student Loan Servicers Licensed
and Non-Licensed (covered) by the Department of Financial Protection and Innovation, (accessed Apr. 23, 2023),
https://dfpi.ca.gov/student-loan-servicer-licensees/.
39
U.S. Department of Education, National Center for Education Statistics, National Postsecondary Student Aid
Study: 2020 Undergraduate Students (NPSAS:UG). Institutional loan amount (INLNAMT) represents the total
amount of institutional loans (funded by the educational institution) that were received during the 2019-2020
academic year. Weight used in frequency: WTA000. The range of loan amounts received was $10 to $36,981 and the
average amount receive was $4,006.57.
40
Institutional loan data provided by a subset of public universities in California concluded that a total of almost
375,000 students in California took on institutional debt annually in the amount of $195 million, meaning that the
average institutional loan size in that sample was roughly $525 per student per year. However, it is not clear how the
schools in this dataset define andtracks institutional loans in their data and, thus, the inclusion of tuiti on p ayme n t
plans in the totals may varyor may exclude payment plans altogether. Thus,this data is of limited use for the purpose
of understanding average TPP loan amounts.
For more information, see: Eaton, C., Glater, J.; Hamilton, L.; &
Jiménez, D., (Apr. 1, 2022), Creditor Colleges: Canceling Debts that Surged during COVID-19 for Low-Income
Students, available at https://ssrn.com/abstract=4072193. Data used for this estimate reflect institutional debts
accrued in the 2020-2021 academic year.
41
The number of installments a student pays can vary both within a school and across schools. The number of
payments is influenced by the length of the academic term, when the student enrolls in the plan, the due date for the
full tuition payment, and the payment frequency (e.g., every two weeks, monthl y).
11 CONSUMER FINANCIAL PROTECTION BUREAU
if they receive additional financial aid or incur additional expenses. Although most tuition
payment plans cover an academic term, schools have varying start dates and due dates, which
can result in different plan durations.
42
1.1.4 Fee structures
Based on the observed sample, typical plans include three types of fees: enrollment or set-up
fees, late fees, and returned payment fees (which do not include any separate insufficient funds
fee charged by the student’s financial institution). These fees are prevalent (Table 1). For
example, 89 percent of the plans the CFPB identified publicly disclosed an enrollment fee and
80 percent of observed payment plans disclosed charging a late fee and/or a returned payment
fee.
43
Typically, students also pay transaction fees if they pay using a credit or debit card, which
is a common practice on many types of consumer payments.
TABLE 1: TUITION PAYMENT PLAN FEE OVERVIEW
44
Fee Type Description
Share of Plans
with Fee Type
Disclosed
Median /
Average
Enrollment or
Set-Up Fees
Charged to student for each plan they
enroll in, typically per academic term; may
be disclosed as finance charges
89% $30 / $37
Returned
Payment Fee
Charged if payment is returned due to
insuf ficient funds or for any other reason
60% $30 / $29
Late Fee
Charged if a student misses a payment
deadline
44% $30 / $46
Schools often have the ability to set fee amounts, which are sometimes split with third-party
service providers. In cases where the school and third-party service provider split fees, the third-
party service provider often sets a baseline fee that the school can add onto. While schools
42
At all colleges where the CFPB identified a TPP offering(n=400), the CFPB observed 377 colleges(94 percent) at
which publicly disclosed TPP terms aligned with academic terms such as semesters or quarters, 7 colleges (2 percent)
with a TPP option up to 12 months, and 16 colleges where duration could not be found (4 percent).
43
The CFPB found 354 out of 400 payment plans publicly disclosed that they charged an enrollment fee. For the
remaining 43 plans, no publicly available information on an enrollment fee could be found (meaning that some of
these plans could charge enrollment fees). The CFPB added the 237 colleges that publicly disclose charging a returned
payment fee and the 174 colleges that p ublicly disclose charging a l ate fee and divided b y the total numb er of colleges
with publicly disclosed TPPs (n=400) to arrive at a total of 80 percent of colleges charging a late fee, a returned
payment fee, or both. One provider (Nelnet) automatically drafts students accounts on pre-set dates, so returned
payment fees may function as late fees in certain cases.
44
CFPB analysis of information provided on college websites. For more information about the methodology, see
Appendix A.
12 CONSUMER FINANCIAL PROTECTION BUREAU
primarily set late fees, returned payment fees are often set by the third-party service provider. In
most cases, these fees are fixed sums and in other cases they are based on a percentage of a
borrower’s outstanding balance.
The median amount for flat fees was $30 each for enrollment fees, returned payment fees, and
late payment fees. However, the CFPB observed instances of much higher fees such as
enrollment fees as high as $200 on a plan offered directly by a school
45
and late payment fees as
high as $300 for a single instance of late payment. In other cases, late fees are expressed as a
percentage amount,
46
and the CFPB saw examples where schools may impose APR finance
charges of up to 18 percent
47
to past due balances.
FIGURE 3: ENROLLMENT, RETURNED PAYMENT, AND LATE FEE DISTRIBUTIONS
48
45
See, e.g., Arizona State University, Tuition and Aid Webpage (accessed Apr. 23, 2023),
https://tuition.asu.edu/billing-fi nances/payment-p lan#websp ark-anchor-li nk--19. This website states the “ASU
Payment Plan fee” is $100 for resident students and $200 for nonresident students.
46
See, e.g., Ferris State University, Student Account Payment Options and Due Dates, (accessed Jul. 21, 2023),
https://www.ferris.edu/administration/businessoffice/payments.htm. This website states that “Accounts are subject
to a 2% late fee for each missed payment.””
47
See, e.g., Franklin University, Payment Options Webpage, (accessed Jul. 21, 2023),
https://www.franklin.edu/tuition-financial-aid/payment-options. This website states that “There is a 7 day grace
period for all balances; thereafter past due balances are subject to an 18% APR finance charge.”
48
The CFPB’s analysis tracked fees across different colleges. This figure reports results at all colleges where tuition
payment plan flat fee amounts were publicly available. If multiple fee amounts were reported, the CFPB selected the
maximum (n=344 for enrollment fees, n=221 for returned payment fee, and n=125 for late fees).
13 CONSUMER FINANCIAL PROTECTION BUREAU
1.1.5 Contract terms
Typically, colleges require students to sign contracts at the point of enrollment in order to
establish that students agree at the point of registration to pay for tuition, fees, and other
associated costs.
49
Colleges sometimes embed terms related to the payment of tuition and fees
into college enrollment documents that students are required to sign, some of which they may
sign before the term begins – such as registration agreements
50
and student financial
responsibility agreements.
51
The frequency at which schools present these types of contracts to
students varies and can be as infrequent as once at time of enrollment.
52
These enrollment documents govern tuition non-payment and may also govern late payment
and nonpayment of tuition payment plans”
53
In many cases, borrowers also sign contracts
provided at the point-of-enrollment in the tuition payment plan.
54
In some cases, provisions
about the consequences of late payments are not disclosed when students enter into the tuition
payment plan, which could lead to consumer confusion, and the presentation of consequential
contract terms in separate agreements could make it more difficult for consumers to students to
understand the product.
49
NACUBO and Fl ywire, Best Practices for Student Financial Responsibility Agreements: Advisory Report 21-02,
(2021), https://www.nacubo.org/Publications/Advisories/AR-21-02-Best-Practices-For-Student-Financi al -
Responsibility-Agreements, at 1 and 5.
50
See, e.g., Prairie View A&M University, Fee Payment Plans Webpage, (accessed Apr. 23, 2023),
https://www.pvamu.edu/fmsv/treasury-services/payments/fee-payment-p lans/. This webpage states that “All
students must accept the promise to pay payment agreement through Panthertracks that is presented at the time of
online registration[, which states that] ‘I agree that if I have not paid 100% of my current tuition, fees, and charges by
the last business day before the first class day, that PVAMU has my permission to automatically enroll me in the
installment method for payment of my current tuition….’”
51
NACUBO and Fl ywire, 2021. See also, e.g., Northwest Missouri State University, Statement of Financial
Responsibility, (May 15, 2023), https://www.nwmissouri.edu/studentaccounts/PDF/Statement-of-Financial-
Responsibili ty.p d f. This statement discloses terms related to transcript and registration holds, debt collection, and
credit reporting. See also, e.g., University of Rhode Island, University of Rhode Island Student Financial
Responsibilities Agreement, (accessed Aug. 27, 2023), https://web.uri.edu/tuition-billing/university-of-rhode-
island-student-financi al-responsibilities-agreement/.
52
Nati onal Association of College and University Business Officers (NACUBO), 2019 Student Financial Services
Policies and Procedures Report, https://www.nacubo.org/research/sfs%20benchmarking%20report, at 21.
53
NACUBO and Flywire 2021, at 3. “A student financial responsibility agreement provides relevant information about
official institutional policies to students and contractually binds them to these policies. It is intended to properly
disclose and set the contractual parameters between the creditor and consumer for the duration of the contractual
relationship and to outline the relevant remedies available if there is a material breach of the terms…. NACUBO
recommends use of a comprehensive student financial responsibility agreement as a student service best practice, to
clearly outline the creditor/consumer rel ationship, to protect the school, and to comprehensively disclosure student
obligations…. [The] legal goal [is] a clear contract that binds the student to the most current policies of the institution
and covers all the amounts that become due and owing during a student’s tenure with the institution.”
54
See, e.g., Bowling Green State University, BGSU – How to enroll in the Installment Payment Plan Video Tutorial,
(accessed May 24, 2023), https://www.youtube.com/watch?v=Rj_Aohy2Oa8&t=78s.
14 CONSUMER FINANCIAL PROTECTION BUREAU
Contract terms and conditions can vary widely. The CFPB identified instances of the following
terms and conditions in agreements that appear to govern the use of tuition payment plans:
Waivers of consumer rights: In some cases, tuition payment plan contracts require
students to waive their right to participate in any class action or representative lawsuit
and to only seek remediation through mandatory arbitration.
55
Balance acceleration and changes: In some cases, a student’s entire balance could
be accelerated if they miss a single payment.
56
In other cases, late payments may convert
a no-interest installment plan into an interest-bearing loan.
57
Transcript and registration holds: If a student has outstanding debt (i.e., from
missing a scheduled payment), some schools may place the student on an academic hold,
barring them from attending classes or withholding their official transcript or diploma.
58
Debt collection and credit reporting: Some colleges send the student’s outstanding
obligations to a debt collector and report the debt to a credit bureau. In these cases, the
school typically adds any fees associated with debt collection to the student’s bill.
59
1.2 Third-party private installment loans
The CFPB recognizes that other installment loan options are offered by third-party private
lenders that are not colleges. However, because these products are not offered directly by
colleges, they are outside of the scope of this report.
55
See, e.g., Valencia College, Nelnet Business Solutions Terms & Conditions, (accessed Jan. 31, 2023),
https://valenciacol lege.edu/students/business-office/tuition-installment-plan/nelnet-ter ms.p hp .
56
See, e.g., Thomas Jefferson School of Law, Student Handbook, (accessed May 24, 2023),
https://www.tjsl.edu/sites/default/files/student_handbook_jd_program_-_ca l s_-_january_23_2022.pdf, at 55.
This handbook states that “If [a student fails] to make any payment on time, the entire unpaid balance including
service charges, plus any applicable penalty charges may, at the sole option of the School, become immediately due
and payable.”
57
See, e.g., Franklin University, Tuition Payment Plans & Options Webpage, (accessed Apr. 23, 2023),
https://www.franklin.edu/tuition-financial-aid/payment-options. This website states that “There is a 7 day grace
period for all balances; thereafter past due balances are subject to an 18% APRfinance charge.”
58
See, e.g., Bethel University, Holds & Student Billing Policies, (accessed May 24, 2023),
https://www.bethel.edu/business-office/student-billing-policies. This website states that “When payments have not
been received by the appropriate due date, a hold will be placed on your account” and links to additional information
about registration and transcript holds.
59
See, e.g., Salisbury College, Penalties for Late Payment and Non Payment Webpage, (accessed Feb. 1, 2023),
https://www.salisbury.edu/administration/administration-and-finance-offices/financial-services/accounts-receivable-cashiers-
office/payment-penalties.aspx. See also, e.g., Chicago State University, Payment Deadlines & Plans Webpage, (accessed
Apr. 23, 2023), https://www.csu.edu/financialoperations/bursar/payment_deadlines.htm.
15 CONSUMER FINANCIAL PROTECTION BUREAU
States and consumer advocates have noted that these types of installment products may be
prevalent among non-accredited programs and have raised concerns about the growth of
installment lending enabling students to attend high-cost non-accredited and/or low-quality
programs, including those offered by buy now pay later (BNPL) providers (who traditionally
have provided installment lending in the retail space).
60
For example, a 2022 report highlighted
that BNPL providers such as PayPal, Affirm, Klarna, Sezzle, Shop Pay, Uplift, and Zip have
partnered with bootcamp programs to offer education installment loans.
61
The CFPB recently
estimated, based on newly-available data, that private sector lending for education by BNPL
lenders increased by 1,028 percent between 2019 and 2021, indicating rapid growth in recent
years.
62
Other third-party private lenders for education include Meratas, Climb Credit, TFC
Tuition Financing,
63
and Meritize.
60
State Attorneys General of Illinois et al., Comment Letter on Notice and Request for Comment Regarding the
CFPB’s Inquiry Into Buy-Now-Pay-Later Providers, Docket No. CFPB-2022-0002 (Mar. 25, 2022),
https://www.regulations.gov/comment/CFPB-2022-0002-0025.
61
See, e.g., Student Borrower Protection Center, (Mar. 2022), Point of Fail: How a Flood of “Buy Now, Pay Later”
Student Debt is Putting Millions at Risk, https://protectborrowers.org/wp-
content/uploads/2022/03/SBPC_BNPL.pdf.
62
Consumer Financial Protection Bureau, (Sep. 2022), Buy Now, Pat Later: Market Trends and Consumer Impacts,
https://files.consumerfinance.gov/f/documents/cfpb_buy-now-pay-l ater-market-trends-consumer-
impacts_report_2022-09.pdf. This report specifies that the “Services” vertical, which includes education (alongside
insurance, pet care, services, and subscription fees), represented only 2.6 percent of total BNPL loan volume in 2021
[and that] In 2021, the five lenders surveyed [by the CFPB] originated $59.8 million in BNPL loans to retailers in the
Education sub-vertical.”
63
See, e.g., Circle of Love Academy, Student Information Webpage (accessed Apr. 25, 2023),
https://circleofloveacademy.com/student-information. This website states that “To get started with TFC Tuiti on
Financing, you simply contact your management team and ask them to help you set up a payment plan that works for
you.” See also, e.g., The Academy of Pet Careers, TFC Tuition Loans Webpage, (accessed Apr. 25, 2023),
https://www.theacademyofpetcareers.com/loan-application/. This website states that “The APC is partnered with
TFC Tuition to provide our students with customized payment plans designed for success after graduation.”
16 CONSUMER FINANCIAL PROTECTION BUREAU
2. Consumer risks
The CFPB’s research has identified several features of tuition payment plan products offered by
colleges that may pose consumer risks. These include inconsistent product definitions and
disclosures, hidden or non-elective enrollments, high costs related to late payment, potentially
deleterious debt collection practices, and waivers of consumer rights.
2.1 Inconsistent disclosures
The wide variation in terms that are offered by tuition payment plans, and the terminology that
schools use to describe them, may confuse consumers about the nature of the financial
arrangement they are entering into. For instance, some schools market tuition payment plans as
an alternative to student loans.
64
Others describe very similar no-interest products as loans
(Table 2).
65
Further, information about fee levels and terms are often spread across several
different documents and/or webpages, which may make it difficult for consumers to find
complete information. Overall, these practices could obscure the nature of the product, the cost
of credit, and what entity owns or services the product.
66
And because tuition payment plans are
often offered to students by their schools after they have already enrolled, the circumstances
might result in a captive market in some situations in which students may not be able compare
the products to other options.
64
While tu iti on p ayme nt p lans are generally mark eted this way, many tuition payment plans are in fact private
student loans under TILA, generally as non-Title IV loans issued for postsecondary educational expenses to a
borrower that does not include an extension of credit under an open-end consumer credit plan, a reverse mortgage
transaction, a residential mortgage transaction, or other real-estate or dwelling secured loan. See 15 U.S.C.
1650(a)(8). And, depending on their structure, some maystill be closed-end credit under Regulation Z, at 12 CFR part
1026. Specifically, Regulation Z excludes tuition payment plans from its definition of “private education loan” if no
interest is applied and the term of the extension of credit is one year or less. 12 CFR 1026.46(b)(5)(iv)(B). As a result,
such tuition payment plans are not required to comply with Regulation Z’s private education loan disclosure and
timing requirements. However, suchtuition payment plansmight stil l be considered closed-end credit – and colleges
offering the plans may be considered creditors – under Regulation Z and be subject to the regulation’s general
advertising, disclosure, and timing requirements that apply to closed-end credit. This could be the case, for example,
if a tuition payment plan has more than four installments or is subject to a finance charge, which may mean that the
school is a creditor subject to the disclosure and timing requirements for closed-end credit under Regulation Z. See 12
CFR §§ 1026.2(a)(17), 1026.17, 1026.18, and 1026.24.
65
See, e.g., Transact Holdings Inc., 2022, Payment Plans: An alternative to student loans,
https://transactcampus.com/resources/infographics/request/an-easier-way-to-p roce ss-payment-plans. Accessed
January 11, 2023.
66
In interviews conducted in March 2023 with current students, the CFPB observed that some students did not
understand that some tuition payment plans could be forms of credit, and some did not understand thatthe tuition
payment plan they were using was offered by theirschool and not by the federal government. Others thought that a
tuition payment plan was simply a plan to repay their federal student loan debt.
17 CONSUMER FINANCIAL PROTECTION BUREAU
Key differences in tuition payment plan descriptions observed by the CFPB include (Table 2):
Whether a non-interest-bearing payment plan was called a loan;
67
Whether product costs and fees were publicly disclosed on college websites;
Whether the cost of credit was clearly disclosed and whether fees were treated as finance
charges. Across schools, similar products were found to have inconsistent APR
disclosures;
68
and
Whether the TILA requirements for closed-end credit advertising under Regulation Z are
being applied.
69
TABLE 2: TUITION PAYMENT PLAN PRODUCT DESCRIPTION EXAMPLES
Institution Product Description
Georgia Southwestern “This is not a loan program. You have no debt, there are no interest or
f inance charges and there is no credit check.” State University
70
“The enrollment fee is considered a finance charge … To make it easy for
consumers to compare this cost to other forms of credit, Transact provides
the equivalent annual percentage rate (APR) … Maximum APR limits may
be subject to applicable state usury laws.”
Harford Community
C
ollege
71
“These services and benefits constitute educational loans or benefits
Colorado Mesa
extended to me to finance my education [and] may not be discharged in
University
72
bankruptcy.”
These inconsistencies in product definitions and disclosures could make it difficult for students
to understand the true cost of credit, compared to other education financing options. While
67
This is further complicated b y the exampl es of interest-bearing private loan products being advertised as “payment
plans.”
68
See 12 CFR 1026.4 (regarding finance charges) and 1026.24 (regarding closed-end credit advertising
requirements).
69
This report does not comment on the applicability of these requirements for any specific tu i tion p ayme nt plan
because such a determinationwould be fact-specific and is outside of the scope of this report and the information
reviewed.
70
Georgia Southwestern State University, Nelnet Payment Plan Webpage, (accessed Feb. 15, 2023),
https://www.gsw.edu/student-account/nelnet-payme nt-plan.
71
Harford Community College, Payment Plan Webpage, (accessed Feb. 15, 2023),
https://www.harford.edu/admissions/tuition/payment-plan.php;
72
Colorado Mesa University, Student Financial Responsibility Agreement, (accessed Feb. 15, 2023),
https://www.coloradomesa.edu/student-accounts/documents/financial-responsibility-agreement.pdf.
18 CONSUMER FINANCIAL PROTECTION BUREAU
some schools provide sample TILA disclosures, others do not. And when TILA disclosures are
provided, rates can vary widely based on plan details such as the size of the enrollment fee.
73
Despite rarely charging interest, tuition payment plans are still a form of credit that may subject
consumers to various fees. The cost of credit can vary widely based on the terms of the specific
plan, the amount financed, and the size of the enrollment fee. Some tuition payment plans have
relatively low costs of credit (around 2 percent APR).
74
Other payment plans that are used to
finance smaller amounts, charge higher than median fees, and/or plans that compel repayment
over shorter durations can lead to relatively high APRs: The CFPB estimates that some plans,
under certain circumstances (e.g. for students who borrow small amounts and pay high
enrollment fees) could have annual percentage rates up to 237 percent.
75
In addition to inconsistent terms and disclosures among tuition payment plans, students may
face further risk because some schools and bootcamps use terms similar to those used in tuition
payment plans, like “payment plans”
76
and “financing plans”
77
to describe private, interest-
73
For example, some schools offer sample annual percentage rate (APR) disclosures in videos or documents that
provide instructions for students who are interested in enrolling in a tuition payment plan. The CFPB observed
sample rates as low as zero percent and as high as 182 percent. See, e.g., University of Texas at Tyler, Enroll in a
Payment Plan How-to Video, (accessed May 25, 2023),
https://www.uttyler.edu/enroll/tutorial-library/payment-
plan/. See also, e.g., Baton Rouge Community College, How to Make a Payment Tutorial, (accessed May 25, 2023),
https://docs.google.com/document/d/1QRNMcVY1qpbQk zf1JRgqCqrOEKCAEYVUY3aQxryfTpg/edit, at 16.
74
CFPB analysis using the Federal Financial Institutions Examination Council’s (FFIEC) APR Tool,
https://www.ffiec.gov/examtools/FFIEC-Calculators/APR/#/accountdata. This analysis models APRs for tuition
payment plans with a semester term (defined as three months) that are paid with four payments (with the first
payment made at the time of consummation and the finance charge incurred on the first payment), assuming that
payments were due monthly. The plan that resulted in an APR of 2 percent assumed a finance charge of $30 and a
loan amount of roughly $5,500. See Section 1.1.2 for additional detail on and about the sources and limitations of
these tuition payment plan average loan amount estimates.
75
CFPB analysis using the Federal Financial Institutions Examination Council’s (FFIEC) APR Tool,
https://www.ffiec.gov/examtools/FFIEC-Calculators/APR/#/accountdata. This analysis models APRs for tuition
payment plans with a semester term (defined as three months) that are paid with four payments (with the first
payment made at the time of consummation and the finance charge incurred on the first payment), assuming that
payments were due monthly. The plan that resulted in an APR of 237 percent was modeled to include the highest
observed enrollment fee of $200 and a small amount financedof $525. The highest observed enrollment fee on a
tuition payment plan offered by a college was $200 at Arizona State University. See Section 1.1.2 for additional detail
on and about the sources and limitations of these tuition payment plan average loan amount estimates. See also, e.g.,
Carter, C., (2022), “Predatory Installment Lending in the States: How Well Do the States Protect Consumers Against
High-Cost Installment Loans?,” National Consumer Law Center,
https://www.nclc.org/resources/predatory-
installment-lending-in-the-sta tes-2022/ (describing state interest rate caps and noting a median 39.5% APR limit for
$500, six-month installment loans and a 32% APR limit for $2,000, two-year installment loans in 2022). See also 10
U.S.C. § 987(b) and 32 CFR 232.4(b) (setting 36 percent limit for military annual percentage rates (MAPRs)). We do
not comment in this report as to the applicability of any state interest rate or MAPR limits to the tuition payment
plans reviewed.
76
See, e.g., Aviation Institute of Maintenance – Atlanta, (Jun. 2022), A Guide to Our Financial Aid Programs and
Consumer Information, https://aviationmaintenance.edu/wp-content/uploads/2022/08/FA-Guide-for-Stu den ts-
07132022.pdf, at 10. This guide states that “We may be able to provide interest bearing monthly payment plans for
students who are not eligible for other financial aid plans or sufficient financial aid.”
77
See, e.g., San Joaquin Valley College, Financial Aid at San Joaquin Valley College Webpage, (accessed Apr. 25,
2023), https://www.sjvc.edu/guides/financial-aid/.
19 CONSUMER FINANCIAL PROTECTION BUREAU
bearing education loans. This overlap in terminology could lead to consumer confusion about
the nature of the product. For instance, one boot camp program’s “deferred tuition” option
(structured as a 12.5 percent interest rate loan with an additional 5 percent origination fee) was
advertised using the slogan “learn now, pay later,” which may lead borrowers to wrongly believe
the product is structured like a typical no-interest BNPL loan or tuition payment plan.
78
2.2 Automatic enrollments and forced use
In some cases, borrowers may become enrolled in a tuition payment plan without knowingly
signing up for one or because institutional Title IV disbursement practices leave students
without viable alternatives. Sometimes, students do not receive their federal financial aid
disbursements in time to meet their school’s tuition payment deadlines, due to a delay or
differences between disbursement dates and tuition payment deadlines. In other cases, students
may withdraw from school and may be on the hook to repay the school for all or some of a
previously disbursed financial aid award such as a Pell Grant, the amount of which has been
based on the student’s enrollment for the full academic term. When this occurs, the use of
tuition payment plans may lead to the accumulation of fees (such as enrollment fees and late
fees).
Enrollment due to financial aid delays
In the CFPB’s review of complaints submitted to the Department of Education, we observed that
several students indicated in complaints that they felt they had no option but to enroll in tuition
payment plans, most often in cases where their tuition due date did not line up with their federal
financial aid disbursement date. For instance, one school states on its website that students who
don’t know if they are getting financial aid yet or who think it will come at some point during the
academic term should enroll in a payment plan.
79
In an unrelated complaint from a student, a
Pell Grant recipient called the Department of Education’s Office of Federal Student Aid (FSA)
about processing delays related to her disbursement and said that she was told by her school
that if she did not sign up for a payment plan she would be dropped from classes.
80
Another student complained about the high cost of the tuition payment plan offered by their
school and stated that:
78
See, e.g., Bloom Institute of Technology, Deferred Tuition Webpage, (accessed Apr. 25, 2023),
https://www.bloomtech.com/tuition/deferred-tuition.
79
Lane Community College, College Account Payment Plans Frequently Asked Questions, (accessed Apr. 25, 2023),
https://inside.lanecc.edu/sites/default/files/collfin/ways-to-pay-faq.pdf.
80
Complaint submitted to the U.S. Department of Education, Office of Federal Student Aid on August 10, 2021.
20 CONSUMER FINANCIAL PROTECTION BUREAU
[My institution’s] inability to process student’s financial aid in a timely
manner [forces] students and parents to sign up for [a] payment plan which is
more expensive…. I feel that if it is the school that cannot process financial aid or deal
with the amount of students then the students should not have to pay for their mistakes….
The school’s financial aid practices should be investigated.
81
In another example, a student at a large public university complained to ED that they were
enrolled in a tuition payment plan due to a disbursement delay:
Due to system issues that delayed receiving my aid by weeks [at my school
and despite being told by several financial aid representatives] that I wouldn’t
be enrolled in the payment plan…I was charged this fee and enrolled into the
plan [emphasis added]. Additionally, I’m entering the 3
rd
week of classes for the semester
and still haven’t received my student loans…. I filled out any additional tasks required
promptly – often that same day…. I have to use the remainder of the student loans for
textbooks, housing, and other related educational expenses. This delay by them has cost me
extra fees, stress, and grief.
The student received their financial aid disbursement three days after they submitted the
complaint.
82
Another similar complaint from a Pell Grant recipient at a community college stated that:
[Every] semester I try to take classes [at my school], they try to force me into
setting up [a] payment plan to pay out of pocket when my [Pell Grant] has not
been issued. I then had to drop several classes due to the fact that I couldn’t afford the
next payment and my [Pell Grant] never came.
FSA advised this student to work with the school to pay any balance owed.
83
Another similar complaint from a Pell Grant recipient at a community college stated that:
I have received the Pell Grant, but my school doesn’t seem to be dispersing
[sic] any payments to me. They put me on a payment plan, and I had to pay
about $800 out of pocket. I looks like they are going to make me pay another $800 out
of pocket in the next couple of weeks (money that I don’t have)…. They just keep telling me
81
Complaint submitted to the U.S. Department of Education, Office of Federal Student Aid on August 22, 2018.
82
Complaint submitted to the U.S. Department of Education, Office of Federal Student Aid on August 31, 2022.
83
Complaint submitted to the U.S. Department of Education, Office of Federal Student Aid on February22, 2019.
21 CONSUMER FINANCIAL PROTECTION BUREAU
that things are “processing.” I suspect I am not the only student who is having this problem
here. I don’t know what to do anymore.
The student asked FSA to help them receive their full disbursement to help them avoid making
future out-of-pocket payments and wanted a refund for their prior payment. After researching
the student’s situation, FSA concluded that the student’s institution has a practice of disbursing
the Pell Grant in multiple payments, which is in compliance with federal regulations.
84
Enrollment due to withdrawal from classes
The CFPB observed that some schools may enroll students in tuition payment plans
automatically if they miss a tuition payment deadline.
85
In other cases, students who withdraw
from school after the school’s tuition refund deadline has passed may have their previously
disbursed Pell Grant, other federal student financial aid, or federal student loan disbursement
revoked and converted into a balance or debt owed to the school. When this occurs, some
schools may automatically convert this financial obligation into a tuition payment plan
(sometimes called a past-due payment plan).
86
This practice has been highlighted as one that
may have a disproportionate impact on low-income students who withdraw from school due to
emergencies such as family needs or health crises.
87
These automatic enrollment and forced use practices may present harms to students by adding
fees to the cost of attending school or by compelling out-of-pockets payments during the school
year.
84
Complaint submitted to the U.S. Department of Education, Office of Federal Student Aid on September 5, 2019.
Under the Department’s regulations, an institution may pay a student Federal Pell Grant funds at such times and in
such installments as it determines will best meet the student’s needs. 34 CFR 690.76(a).
85
See, e.g., Arizona State University, Tuition and Aid Webpage (accessed Apr. 23, 2023),
https://tuition.asu.edu/billing-finances/payment-plan#we bsp ark-anchor-li nk--19. This website states that “If you
have outstanding charges of $500 or more after the payment deadline, you’ll be automatically enrolled in the ASU
Payment Plan and be billed an ASU Payment Plan fee [of $100 for resident students or $200 for nonresident
students].” See also, e.g., Oklahoma Community College, Bursar Webpage, (accessed Jan. 11, 2023),
https://www.occc.edu/bursar/. This website states that “If you miss your designated due date for an in-full payment, we’ll
automatically place you on a monthly payment plan that lets you payoff your tuition and fees over time. The payment
plan incurs a $25 set-up fee per term.”
86
See 34 CFR 668.22; U.S. Dep’t of Education, Office of Federal Student Aid, Return of Title IV Funds (R2T4),
(accessed Feb. 2, 2023), https://fsapartners.ed.gov/knowledge-center/library/functional-
area/Return%20of%20Title%20IV%20Funds%20%28R2T4%29#:~:text=R2T4%20refers%20to%20the%20calculation,which%2
0the%20recipient%20began%20attendance. See also, e.g., Eaton, C., Glater, J.; Hamilton, L.; & Jiménez, D., (Apr. 1,
2022), Creditor Colleges: Canceling Debts that Surged during COVID-19 for Low-Income Students, available at
https://ssrn.com/abstract=4072193.
87
Eaton, C., Glater, J.; Hamilton, L.; & Jiménez, D., (Apr. 1, 2022), Creditor Colleges: Canceling Debts that Surged
during COVID-19 for Low-Income Students, available at https://ssrn.com/abstract=4072193.
22 CONSUMER FINANCIAL PROTECTION BUREAU
2.3 High costs related to late payment
If students fall behind on their payments, they are typically assessed late fees, and may
sometimes also be subject to a returned payment fee if their automatic payment was declined.
Even students who miss just one payment may be subject to balance acceleration, where the
entire balance of the loan becomes due in full, or may have their non-interest-bearing loan
converted into an interest-bearing loan.
88
These practices can impose high costs on students
who make late payments.
89
The CFPB found that four out of five plans publicly disclose that they impose late fees, returned
payment fees, or both.
90
Median returned payment and late fees were both $30 and the average
fees were of $29 and $47 respectively.
91
However, a 2019 industry survey established that,
among a different sample of schools charging late fees, the average maximum late fee was
almost $110.
92
The CFPB observed 19 plans that had late fees of $100 or more.
93
In addition, almost 30 of the schools researched by the CFPB, representing 18 percent of the
total sample, imposed late payment penalties that were calculated as percentages of outstanding
88
See, e.g., Franklin University, Tuition Payment Plans & Options Webpage, (accessed Apr. 23, 2023),
https://www.franklin.edu/tuition-financial-aid/payment-options. This website states that “There is a 7 day grace
period for all balances; thereafter past due balances are subject to an 18% APR finance charge.”
89
Industry groups estimate that an average of 32 percent of current and former students had unpaid balances owed
to their colleges at the end of FY20. See National Association of College and University Business Officers, 2021
Student Financial Services Benchmarking Report, at 3. This report i s b ased on survey responses col lected between
2017 and 2021 and this data point is based on 2021 survey responses from hundreds of participating institutions. This
report also states that in FY20, approximately 4 percent of student accounts were placed into internal or external
collections, but this percentage includes only students who were “enrolled in credit-earning courses” and thus is
unlikely to include students who were dropped from courses due to non-p a yme nt.
90
To determine this, the CFPB added the 237 colleges that publicly disclose charging a returned payment fee and the
174 colleges that publicly disclose charging a late fee, then subtracted the 93 colleges that publicly disclose charging
both fees – and divide by the total number of col leges with publicly disclosed TPPs (n=400). More colleges may
charge late and returned payment fees but may not disclose them publicly (i.e., col leges may include them in point-of-
sale disclosures to students).
91
In many cases, the fees observed by the CFPB were higher than comparable fees charged on other consumer
products such as credit cards. In the credit card context, TILA section 149, requires, among other things, that the
amount of any penalty fee with respect to a credit card account under an open-end consumer credit plan in
connection with any omission with respect to, or violation of, the cardholder agreement, including any late p ayme nt
fee or any other penalty fee or charge, must be “reasonable and proportional” to such omission or violation. 15 USC
1665d(a). The Bureau issued a proposed rule on credit card late fees pursuant to this provision on March 29, 2023
and is currently reviewing comments. 88 FR 18906
92
National Association of College and University Business Officers, 2019 Student Financial Services Policies and
Procedures Report, at 9. This average amount is based on responses from 454 schools and refers to the maximum, or
“capped,” late fee that those schools charge in their late fee policy for undergraduates (see page 42 of the NACUBO
report for exact survey language).
93
See, e.g., The Ohio State University, Pay Tuition and Fees Webpage, (accessed Apr. 23, 2023),
https://busfin.osu.edu/bursar/paytuition. This webpage discloses that “Failure to pay by the due date listed for each
installment may result in late fees being assessed to your account [of] up to $300 for the first installment [and] $25
per installment for subsequent installments.”
23 CONSUMER FINANCIAL PROTECTION BUREAU
balances,
94
with the average amount being nearly 11 percent.
95
In one case, after a seven-day
grace period, one school imposed an 18 percent APR finance charge, which was the highest APR
observed.
96
One student complained about fees on their payment plan and stated that:
My [loan and grants] are dispersing in October [and] these are enough to cover the coming
semester…. However, they are not being applied to my balance and the school is
demanding I pay them in full or enroll in their payment plan and as a
consequence have late fees + the enrollment fee added to my balance until the
loans and grants disperse. If I did not do this I was told my classes would be dropped. I
do not believe this is fair and have never been subject to this in past years….
97
Finally, in cases where payments are sent to debt collectors, some schools charge additional fees
that, in some instances, can add up to 50 percent of a student’s unpaid balance to their
outstanding balance to cover collection costs.
98
This fee is significantly higher than the
contingency fee of almost 16 percent that is typically paid to third-party debt collectors who
work with credit card issuers.
99
When students fall behind on payments, they might face multiple fees in the event of late
payment and experience other negative consequences. Because fees vary widely, a student with
identical payment behavior could pay very different amounts on tuition payment plans at
different colleges (Table 3). For instance, if a student enrolled in a four-installment payment
plan to finance a tuition gap of $525,
100
the student could end up paying between $69 and $399
in fees if the student paid with a credit or debit card online, had insufficient funds in their
account one time, and missed two payments (Figure 4). Late payment penalties of this
94
See, e.g., Red Rocks Community College, Payment Policy Webpage, (accessed Apr. 23, 2023),
https://www.rrcc.edu/tuition/payment-policy#PAST%20DUE%20ACCOUNTS.
95
National Association of College and University Business Officers, 2019 Student Financial Services Policies and
Procedures Report, at 9.
96
Franklin University, Tuition Payment Plans & Options Webpage, (accessed Apr. 23, 2023),
https://www.franklin.edu/tuition-financial-aid/payment-options. This website states that “There is a 7 day grace
period for all balances; thereafter past due balances are subject to an 18% APR finance charge.”
97
Complaint submitted to the U.S. Department of Education, Office of Federal Student Aid on August 4, 2022.
98
See, e.g., Salisbury College, Penalties for Late Payment and Non Payment Webpage, (accessed Feb. 1, 2023),
https://www.salisbury.edu/administration/administration-and-finance-offices/financial-services/accounts-receivable-cashiers-
office/payment-penalties.aspx. See also, e.g., Chicago State University, Payment Deadlines & Plans Webpage, (accessed
Apr. 23, 2023), https://www.csu.edu/financialoperations/bursar/payment_deadlines.htm.
99
Consumer Financial Protection Bureau, (Sep. 2021), The Consumer Credit Card Market,
https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-card-market-report_2021.pdf, at 137.
100
This loan amount is based on the average loan size noted by researchers who estimated institutional debts in the
State of California. See supra note 41.
24 CONSUMER FINANCIAL PROTECTION BUREAU
magnitude can have an outsized impact on young consumers and other students. In some cases,
these late payment penalties may lead to situations where a student owes more than they
originally borrowed on a product that was marketed to them as no-cost.
TABLE 3: FEE STACKING EXAMPLES FOR LOAN SIZE OF $525 PAID IN FOUR INSTALLMENTS
School With School With
Median Observed
Lowest Observed Highest Observed
Fees
102
Late Fee
101
Late Fee
103
Enrollment Fee
$30
$30
$30
Returned Payment Fee
$25
$30
$30
Late Fee (x2)
$0
$60
$325
104
Transaction Fee (x4)
105
$14.44
$14.44
$14.44
Total Amount Financed
$525
$525
$525
Total Fee Amount
$69.44
$134.44
$399.44
Total Amount Paid
$594.44
$659.44
$924.44
101
This example is based on the terms and conditions of the payment plan at Mount Wachusett Community College.
For more information, see, e.g., Mount Wachusett Community College, Payment Options Webpage, (accessed May 2,
2023), https://mwcc.edu/financial-services/payment-options/.
102
This example is based on the median fee amounts in the CFPB’s core dataset. For more information, see section
1.1.2.
103
This example is based on the terms and conditions of the payment plan at The Ohio State University. For more
information, see, e.g., The Ohio State University, Pay Tuition and Fees Webpage, (accessed Apr. 23, 2023),
https://busfin.osu.edu/bursar/paytuition.
104
At this school, the first late payment incurs a fee of $300 and subsequent late payments incur fees of $25.
105
The median transaction fee in the CFPB’s core data set was 2.75%.
25 CONSUMER FINANCIAL PROTECTION BUREAU
FIGURE 4: FEE STACKING EXAMPLE
In other cases, colleges may engage in practices that have been flagged as concerning in other
contexts. For instance, the CFPB observed cases where schools appear to be mandating autopay
and representing returned payments multiple times.
106
Students have little control over such
practices, which may compound any negative effects from missed tuition payments.
Nearly one in five undergraduates (18.5 percent) report that they certainly, or probably, could
not come up with $500 if they faced an unexpected financial need in the next month, indicating
that many students could experience financial hardship due to the accumulation of late fees on
tuition payment plans.
107
In addition, experiences with seemingly small fees can exacerbate the
106
See, e.g., Grand Rapids Community College, Payment Plan Webpage, (accessed Apr. 23, 2023),
https://www.grcc.edu/pay-college/student-financial-services/payment-plan. See also, e.g., Johnston Community
College, Tuition Payment Plan Webpage, (accessed Feb. 6, 2023),
https://www.johnstoncc.edu/payingforcollege/tuition-fees-expenses/tuition-payme nt-
plan.aspxhttps://www.coloradomesa.edu/student-accounts/delinquent-accounts.html.
107
See, e.g., The Hope Center for College, Community, and Justice, (Aug. 3, 2023), New Federal Data Confirm that
College Students Face Significant—and Unacceptable—Basic Needs Insecurity, available at
https://hope.temple.edu/npsas.
26 CONSUMER FINANCIAL PROTECTION BUREAU
financial situation of any consumer but can be particularly harmful for students from low-
income householdswho may have difficulty meeting basic needs
108
2.4 College debt collection practices
Where higher education institutions extend credit, the dual role of lender and educator provides
institutions with a range of available collection tactics that leverage their unique relationship
with students. For example, some postsecondary institutions withhold official transcripts as a
collection tactic. Institutions often withhold transcripts from their students who are delinquent
on debt owed to the institution, while also requiring new students to provide official transcripts
from schools they previously attended. Collectively, this industry practice creates a circumstance
in which a formal official transcript is necessary for students to move from one school to
another, creating a powerful mechanism to enforce payment demands even when consumers
seek to attend a competitor school. Consumers who cannot obtain an official transcript could be
locked out of future higher education and certain job opportunities. Supervisory examinations
conducted by the CFPB indicate that registration and transcript holds may constitute an abusive
financial practice in certain circumstances.
109
CFPB research suggests that transcript withholding may be used to collect past-due payments
for tuition payment plans in many cases, alongside other concerning debt collection practices
such as registration holds, removal of students from classes, revocation of meal plans, and
eviction from campus housing. And external research indicates that hundreds of thousands of
consumers may be subject to debt collection practices related to debts they owe to colleges each
year.
110
• At least one in three schools in the CFPB’s sample say that they withhold
transcripts to collect past due tuition payments.
111
CFPB data reveal that 32
percent of schools include blanket transcript withholding—which the CFPB has
previously cited as an abusive practice—as a debt collection tool in publicly available
written policies that appear to govern the collection of past-due tuition payment plan
108
See, e.g., The Hope Center for College, Community, and Justice, (Mar. 31, 2021), #REALCOLLEGE 2021: Basic
Needs Insecurity During the Ongoing Pandemic, available at
https://scholarshare.temple.edu/bitstream/handle/20.500.12613/6953/HopeCenter-Report-2021-03.pdf.
109
Consumer Financial Protection Bureau, Supervisory Highlights: Student Loan Servicing Special Edition Issue 27,
Fall 2022, (Sep. 2022), https://files.consumerfinance.gov/f/documents/cfpb _student-loan-servici ng-supervisory-
highlights-special-edition_report_2022-09.pdf.
110
Eaton, C., Glater, J.; Hamilton, L.; & Jiménez, D., (Apr. 1, 2022), Creditor Colleges: Canceling Debts that Surged
during COVID-19 for Low-Income Students, available at https://ssrn.com/abstract=4072193.
111
Id.
27 CONSUMER FINANCIAL PROTECTION BUREAU
balances. Prior industry studies have reported that as many as 98 percent of schools hold
transcripts as a collection tactic.
112
The CFPB also observed cases where borrowers could
be removed from classes and prevented from purchasing textbooks.
113
Some of these
practices may be imposed as soon as a borrower has a payment returned or otherwise
misses a payment.
114
In September 2022, the CFPB published a special edition of
Supervisory Highlights detailing examiners’ findings that servicers’ blanket transcript
withholding policies violated the prohibition on abusive acts and practices with respect to
institutional loans.
115
• In some cases, schools reserve the right to remove students from housing or
cancel meal plans due to late payments.
116
In one case, the CFPB observed terms
that included the imposition of “any and all” late payment penalties such as deactivation
of campus identification cards (which would suspend access to campus facilities and city
bus service), dismissal of students from residence halls, suspension of meals plans, and
suspension of participation on athletic teams, along with late fee charges and interest
charged on unpaid balances.
117
112
National Association of College and University Business Officers, 2019 Student Financial Services Policies and
Procedures Report, at 11.
113
See, e.g., University of Minnesota, Late Payment Consequences Webpage, (accessed Apr. 23, 2023),
https://onestop.umn.edu/finances/billing-and-payment/late-payment-consequences. This website states that if “the
University does not receive the amount due on your student account by your b ill ing due d ate[, you will be charged a
late payment fee and we will place a hold on your student record, which] may have the following consequences:Your
current registration may be canceled including classes you are already attending…. You may [also] be unable to make
bookstore charges to your student account.”
114
See, e.g., University of Denver, Cashier Services Webpage, (accessed Apr. 26, 2023),
https://www.du.edu/bursar/payme nt/ca sh -check-money-order. This website states that ” A $20 fee will be assessed
any returned item from the bank. This includes, but is not limited to, stop payments and insufficient funds. A hold
will also be placed on your tuition account preventing registration, the release of official transcripts, the viewing of
account information and the release of diplomas until the payment is resolved.”
115
Consumer Financial Protection Bureau, Supervisory Highlights: Student Loan Servicing Special Edition Issue 27,
Fall 2022, (Sep. 2022), https://files.consumerfinance.gov/f/documents/cfpb_student-loan-s ervicing-supervis ory-highlights-
special-edition_report_2022-09.pdf, at 8.
116
See, e.g., The University of West Florida, Payment Plan Webpage, (accessed Apr. 23, 2023),
https://uwf.edu/finance-and-administration/departments/controllers-office/student-accounts-and-cashier/tuition-
and-fees/payment-plan/. This webpage states that late payments will result in late fees of $50 to $100 and adds that
“If a payment plan includes a meal plan, meals will be suspended until the account balance is paid in full.”
117
Rivier University, Payment Policies Webpage, (accessed May 25, 2023), https://www.rivier.edu/financial-
aid/student-resources/payment-policies/. This webpage states that student who pay late may be subject to a late
payment penalty, the accrual of interest on unpaid balances, deactivation of campus ID card, residence hall dismissal,
suspension of meal plan, suspension of participation with athletic teams, and more.
28 CONSUMER FINANCIAL PROTECTION BUREAU
• Public schools may also use debt collection tactics such as wage garnishment
or tax refund offsets to collect past-due tuition payments.
118
Several schools also
state that debt collection practices include state income tax refunds being intercepted to
offset against overdue balances at public schools and report that they send overdue
accounts to state agencies for collection.
119
2.5 Waivers of consumer rights
Some contracts and agreements related to student financial obligations include terms and
conditions that purport to waive consumers’ legal protections, limit how consumers enforce
their rights, or misrepresent the rights or protections available to consumers under existing
law.
120
Additionally, one industry group providing “best practices” guidance to colleges included
model clauses related to mandatory arbitration, class action waivers, transcript withholding,
waivers of infancy defenses, and bankruptcy in a 2021 best practices document.
121
The CFPB observed terms and conditions in tuition payment plan contracts and student
financial responsibility agreements including waivers of a consumers’ right to a litigate certain
claims in court or through a jury trial, including forced arbitration provisions
122
and class
action/jury trial waiver provisions;
123
waivers of the consumers’ right to seek discharge;
124
118
In many cases, state law may require public colleges to send past-due debts to the state for collection. See, e.g.,
Office of the Ohio Attorney General Mike DeWine, Ohio Attorney General’s Student Loan Debt Advisory Group
Report, (Jun. 2017), https://www.ohioattorneygeneral.gov/Files/Publications-Files/Publications-for-Schools/Ohio-
Attorney-General-s-Student-Loan-Debt-Col lecti .asp x.
119
National Association of College and University Business Officers, 2019 Student Financial Services Policies and
Procedures Report, at 34. According to this industry survey, 41 percent of public institutions use state agencies as
debt collectors.
120
NACUBO and Fl ywire, Best Practices for Student Financial Responsibility Agreements: Advisory Report 21-02,
(2021), https://www.nacubo.org/Publications/Advisories/AR-21-02-Best-Practices-For-Student-Financi al -
Responsibility-Agreements. See also, e.g., National Consumer Law Center, (Jan. 2011), Piling It On: The Growth of
Proprietary Schools and the Consequences for Students, https://www.studentloanborrowerassistance.org/wp-
conte nt/up l oads/Fil e/prop rietary-schools-loans.pdf.
121
NACUBO and Fl ywire 2021.
122
See, e.g., Valencia College, Nelnet Business Solutions Terms & Conditions, (accessed Jan. 31, 2023),
http s://valenciacollege.edu/students/business-office/tuition-installment-plan/nelnet-ter ms.p hp .
123
See, e.g., Tyler Junior College, How to do a Payment Plan at TJC Video Tutorial, (accessed May 25, 2023),
https://www.youtube.com/watch?v=pkmQuCGfIUo.
124
See, e.g., Northwest Missouri State University, Statement of Financial Responsibility, (accessed May 25, 2023),
https://www.nwmissouri.edu/studentaccounts/PDF/Statement-of-Financial-Re sponsi bil ity.p df .
29 CONSUMER FINANCIAL PROTECTION BUREAU
waivers of the consumers’ ability to retain their own counsel;
125
misrepresentations regarding
the legal right to discharge of private student loans in bankruptcy;
126
and waivers of death
discharge.
127
125
See, e.g., University of Arkansas, Installment Plan, (accessed Jan. 31, 2023), https://help-
uaconnect.uark.edu/knowledge-centers/student/install-plan.php. The statement of understanding shown on this
website states that “In the event you should seek to discharge any unpaid portion of your debt identified in this
Agreement, then this Agreement shall serve as conclusive proof that you are indebted to the University, and you
hereby appoint and authorize the University to act as your attorney-in-fact to dismiss any action you may file seeking
to discharge your deb t and/or ob ligations under this Agreement.”
126
See, e.g., Colorado Mesa University, Student Financial Responsibility Agreement, (accessed May 25, 2023),
https://www.coloradomesa.edu/student-accounts/documents/financial-responsibility-agreement.pdf. This
agreement includes a “Promise to Pay” provision that includes the foll owing l anguage: “In the event that any financial
obligation arising under or related to this Agreement is not timely paid in full by me, I agree that such failure to pay
automatically results in an extension of credit to me by CMU [and that] these services and benefits are for educational
purposes [and thus] may not be discharged in bankruptcy.”
127
See, e.g., University of Texas at Tyler, Enroll in a Payment Plan How-to Video, (accessed May 25, 2023),
https://www.uttyler.edu/enroll/tutorial-library/p ayme nt-plan/. This contract states that “This Note and the
provisions thereof are to be binding on my heirs, executors, administrators, assigns, and successors. The provisions of
this Note shall continue in force, notwithstanding my death.”
30 CONSUMER FINANCIAL PROTECTION BUREAU
3. Conclusion
Students are often encountering the consumer financial ecosystem for the first time when they
attend college and may trust and rely on financial advice and products offered by their
schools.
128
While school-offered tuition payment plans may be a good option for certain
students, they may also be a risky option for others. In some cases, tuition payment plans could
lead to debt accumulation and overextension. In the worst cases, late payments on tuition
payment plans could even lead to disenrollment or eviction during the school term—
consequences that would not be possible if the student used another type of debt financing such
as a federal student loan, a traditional private student loan from a non-school lender, or another
form of general-purpose financing. Fees, inconsistent disclosures, and automatic or forced use
may harm consumers in ways that students are unlikely to anticipate when trying to cover their
educational expenses. And because of the unique circumstances in which schools offer tuition
payment plans—sometimes making no other option available for meeting tuition payment
obligations—students might form a captive market in some situations. The CFPB will continue
to gather and analyze information relating to tuition payment plans and to ensure that
institutional lenders follow applicable consumer financial laws.
128
See, e.g., U.S. Dep’t of Educ., Program Integrity and Improvement (Notice of Proposed Rulemaking) 80 FR
28484, 28499 (May 18, 2015) (in noting particular concerns withcollegeco-branding of financial accounts stating,
“Many students trust their schools and, as a result, may view co-branding as an endorsement and an indication their
school has negotiated the best terms for them.”).
31 CONSUMER FINANCIAL PROTECTION BUREAU
APPENDIX A: TUITION PAYMENT PLAN DATASET
METHODOLOGY AND DESCRIPTIVE STATISTICS
A.1 Methodology
A.1.1 Sample construction
This report used the same sample of schools that was used in the CFPB’s 2022 College Banking
Analysis to develop the 2022-2023 Tuition Payment Plan Core Dataset.
129
For each college in
the dataset, the CFPB performed searches using a commercial internet search engine and the
college websites, combining keywords in conjunction with the school name, including but not
limited to “tuition payment plan,” “installment plan,” “payments,” “tuition payments,” “student
financial responsibility,” “late payments,” “past due payments,” and/or “debt collection.” Once
related links were identified, the CFPB reviewed the webpages to identify and record fees, terms,
and disclosures and recorded the URL, as well as the date that the webpage was accessed.
A.1.2 Variables
Once a relevant webpage was identified, the CFPB recorded the institution name and unique
identifier (i.e., OPEID), system affiliation (if applicable), whether a tuition payment plan was
offered, the payment provider or other installment lender, the late fee maximum amount and
category (e.g., flat fee or percentage), the enrollment fee maximum amount and category, the
returned payment maximum fee and category, the transaction fee and category, whether the
school disclosed that it withheld transcripts for late or missed tuition payments, plan length,
date accessed, and relevant URLs. Then, the CFPB pulled in additional information by matching
the institution name and unique identifier (i.e., OPEID) with publicly-available data in the
College Scorecard, including the city and state in which the institution is located, the school type
(e.g., public, non-profit, and for-profit), the institution’s three-year cohort default rate, and the
institution’s Carnegie Classification.
129
The total number of collegesin this sample (N=451) is slightly less than the number of col leges in the 2021-2022
College Banking Data (N=461) as: (1) CFPB did not include a second entry for 9 schools where those schools have
multiple campus banking disclosures and (2) CFPB combined a community college system and a member community
college since the system and school offered the same payment plan. Consumer Financial Protection Bureau, 2020-
2021 College Banking Data, (Oct. 2022),
https://www.consumerfinance.gov/data-research/stud ent-
banking/deposit-prod uct-marketing-agreements-and-data/
32 CONSUMER FINANCIAL PROTECTION BUREAU
A.2 Descriptive statistics
Compared to all public institutions of higher education (IHEs), the IHEs in the primary CFPB
dataset have a similar average three-year cohort default rate and roughly reflect the national
instances of two-year and four-year institutions.
130
The CFPB dataset appears to overrepresent
larger schools (which is likely the result of the fact that this dataset presents several community
college districts at the system level instead of the branch level), HBCUs, and HSIs. The final
database is therefore largely reflective of public Title IV institutions on these observable
characteristics. However, this dataset unable to provide representative information about
private and for-profit IHEs due to sample size.
FIGURE 5: DESCRIPTIVE STATISTICS, CFPB SAMPLE AND NATIONAL SAMPLE
131
Public IHEs Public
CFPB Title-IV
from CFPB Title-IV
Sample
Schools
Sample
Schools
Total number of IHEs
Total undergraduate enrollment
349
3 million
2,081
10.8 million
449
3.6 million
6,681
14.6 million
Average undergraduate enrollment
8,838
5,175
8,084
2,178
Average three-year cohort default
rate
9% 9% 9% 9%
Share of public IHEs
100%
100%
78%
31%
Share of private non-profit IHEs
Share of private for-profit IHEs
Share of Historically Black
Colleges and Universities
0%
0%
3%
0%
0%
2%
18%
4%
4%
30%
39%
2%
Share of Hispanic Serving
Institutions
25% 17% 21% 8%
Share of two-year institutions
50%
55%
40%
37%
Share of four-year institutions
50% 45% 59%
63%
Note: Data used for this analysis was pulled from the September 2022 version of the College Scorecard,
which ref lects enrollment totals from Fall 2020. Variables used include UGDS, CDR3, CONTROL, HBCU,
HIS, and CCUGPROF (all institutions with values of -2, 0, and NULL excluded).
130
The three-year cohort default rate (CDR) has historically been an important indicator of school quality and has
been used to ensure school accountability. The CDR reflects the percentage of borrowers who enter repayment in a
given federal fiscal year and defaultprior to the end of the second following fiscal year. The CDRs in this analysis
reflect the repayment rate of the FSA FY2019 cohort measured in FY2021 and, thus, are low compared to prior years
because members of this cohort benefited from the CARES Act payment suspension that began in March 2020.
131
CFPB data was supplemented with data from the College Scorecard for this analysis. For more information, see:
U.S. Dep’t of Education, (Sep. 14, 2022), College Scorecard, available at https://col legescorecard.ed.gov/data. Data
used for this analysis was last updated in September 2022 and reflects enrollment totals from Fall 2020.
33 CONSUMER FINANCIAL PROTECTION BUREAU
APPENDIX B: GLOSSARY
DEFINED TERM
TUITION PAYMENT PLAN
(TPP)
Private installment plans typically offered by institutions of higher
education, sometimes described as tuition financing, tuition
installment loans, deferred tuition products, or “learn now pay later”
products
INSTITUTION OF HIGHER
EDUCATION (IHE)
A college, university, or similar institution, including a technical or
business school, offering postsecondary level academic instruction
IHEs that participate in the federal student aid program under Title
TITLE-IV SCHOOL
IV of the Higher Education Act of 1965 (HEA)
A third-party company that typically provides software to facilitate
THIRD-PARTY SERVICE
PROVIDER
the administration of a tuition payment plans. In some cases, they
also provide payment processing services via a partner bank
and/or compliance support to the school.
INDEPENDENT SALES
ORGANIZATION (ISO)
ISOs provide front-end, customized services to a client population
(e.g., payments software to colleges and universities, etc.) and sell
their partner bank’s merchant accounts, through which the client
would set up their payment flow. This benefits the partner bank by
bringing additional payments through the bank that can generate
revenue (e.g., acquirer mark-up fees or ACH transaction fees)
34 CONSUMER FINANCIAL PROTECTION BUREAU
