Paying tuition on credit is not a new concept. Since the advent of plastic, colleges and universities have accepted credit cards as a viable method of payment. While it is risky, many parents see the cost of their children not going to college as being higher than paying extra interest on credit cards.
According to a 2007 study by the National Association of College and University Business Officers, there has been a 12 percent increase in credit card tuition payments since 2003. This reflects the rising cost of education and the rather sluggish rise in earnings in the United States. In addition, according to a 2006 study by the American Council on Education, one in four students has used a credit card for tuition.
Fees not only affect those carrying tuition balances on credit cards--they also affect those receiving the funds. Credit card companies have increased transaction fees for tuition payments dramatically. The University of Eastern Michigan, for example, shelled out over one million dollars in merchant fees simply for taking tuition payments on credit cards.
In an attempt to limit their expenses, colleges take one of two measures: stop accepting credit cards as a form of payment or adding convenience charges on top of tuition payments (often as high as 2.75 percent). This helps universities defray the cost of simply making the transaction. This has a negative effect on the student or parent--it adds a substantial amount to the already high tuition payment.
The increase in fees and charges on credit cards has a long-term effect, too. Students can get buried in credit card debt while earning no or low-wages while enrolled in school. In addition to tuition on credit, some students use credit cards to make ends meet while enrolled. In the worst cases, students exit college with hefty credit card bills (often with high interest rates) and large student loans.