The Hunt For Last October's Red Tuition
For a moment set aside collecting this fall’s tuition. What’s it like now to collect LAST year’s tuition? Are students who left owing a balance last spring once again enrolling this fall? Have they quit school and found a job? Are they now enrolled elsewhere, running up a second tab? Do you turn them over to collection agencies? A casual canvass of campus bursars revealed that bursars are nice people, but not naive.
Okay, summer is over, fall is here, and a student has not paid up on last year’s tuition. Is it time to turn his account over to a collection agency? Not so fast. First, the Fair Debt Collection Practices Act has been on the books for decades, and it’s pretty much tilted the playing field in the debtor’s favor. Brass knuckles and rubber hoses are nowhere to be seen. And there are often good reasons for trying to collect in-house.
"Get them while they’re hot. They’re still familiar with you and they still hopefully appreciate what you’ve done for them," says Darla Freeborn, Manager of Student Accounting Services at Whitworth University in Spokane, Washington. "You’ll get the revenue on the books quickly and you’re going to improve your alumni relations. If you send them into hardcore collections, trust me, they won’t have the warmest and fuzziest memories of the institution."
You can run but you cannot hide
Although collection agencies have limited power, that is not the case with colleges. The effective collusion among schools and federal regulations make it possible to preclude any delinquent account holder from enrolling across town in another unsuspecting school.
The Feds say schools cannot use any current federal money over $200.00 to pay off previous debts. (Apparently the Feds can borrow whatever they want against an everincreasing national debt. But students cannot!)
No student with a loan in default on the National Student Loan Data System (NSLDS) can enroll elsewhere. Most schools where a student has payments in arrears will refuse to release a transcript. Without a transcript, forget matriculating in a degreed program.
There have been a few exceptions to the rule. "On occasion, we will release a transcript directly to an employer," allows Kevin Smith at Canisius College in Buffalo. If the transcript means getting a job, then it is in everyone’s best interest to make that happen.
According to bursars with whom I spoke, there are two other scenarios that might enable a delinquent payer to bypass the system. If a first-semester freshman with just a few credits becomes delinquent, he or she has little to lose by walking out sans transcript and starting again at another school.
Another exception involves enrolling elsewhere non-matric, that is to say, not seeking credits toward a degree. A transcript may not be necessary for registration. A student may also enroll at a community college, pay cash, and possibly earn credits toward a degree there or transfer to a four-year school later.
Natural and logical consequences
Most students accept that they owe, and they know that not paying will dog them for a long time.
A graduate student who receives an allowance for housing could buy a big screen TV or fix the car with the surplus cash and later wind up in a financial pickle. However, most undergrads do not—probably cannot— squander borrowed money since federal money comes to the college and is applied directly to tuition and fees first.
Bilker-of-billions Bernie Madoff could slip through more loopholes than a student borrower. A student cannot—like Donald Trump—declare bankruptcy around a student loan or—like the president of the United States—count on getting a job that doesn’t require a college transcript or a good credit rating.
Let’s also remember, leftover tuition and fees from last academic year are residue after financial aid package was applied. These delinquent payors may also be behind on Stafford or other private loans, as well.
In the ecstasy of making it into college, and receiving what seems to be a gigantic financial aid package, students and their parents often overlook the part about loan repayment. That compounds the problem.
When the student is the debtor, FERPA rules prevent the school from contacting the parents without the student’s permission. yet, according to Kevin Smith, at Canisius College nine out of 10 incoming calls are from parents.
Smith lists other factors for unintentional student indebtedness. New york, for instance, was late in awarding its TAP (Tuition Assistance Plan) grants and also cut the grant amounts across the board. Students didn’t know until the beginning of the school year what they were getting.
Perennially late students effectively have to establish a second line of credit. on many campuses, students in arrears sign a promissory note to pay their balance in monthly installments. Canisius doesn’t require a promissory note once a slow-pay student demonstrates that he or she can meet the monthly payment. Apparently there are a lot of "frequent fliers" who have trouble keeping up, but who eventually come through.
Telling it like it is
Colleges prevent a lot of receivable problems. Refusing to allow a past due student to register keeps balances low. Even in tight economic times, Whitworth won’t relax that standard. Bursars may be seen as party-poopers, but their real job is assuring that the inability to remain a student should not be due to poor financial planning.
The hardest part of being a bursar is telling a student he or she can’t stay. "They love it here. It rocks their world, and I feel horrible," laments Ms. Freeborn. On the other hand, "It would be cruel to let a student amass debt he will never get out of."
Kevin Smith says "Schools are reluctant to say, ‘you just can’t afford this school. Maybe you should go somewhere else.’" So—like the exotic car dealer—they take refuge in "the monthly." Let’s see if you can pay this off at five percent a month.
Often a past due student takes a semester off and earns enough to return in good graces. The vast majority are responsible. For a senior who has invested five or six years, the opportunity to work off the debt, get that transcript and enjoy some peace of mind maintains a good relationship with the institution. As Mr. Smith knows, "once you send the debt to the collection agency, you’ll never see a penny from that alum."
TOPICS: Enrollment Management, Finance, Retention