A new report from the Consumer Financial Protection Bureau (CFPB) raises concerns about the potential risks associated with installment plans for college tuition. While these plans offer an alternative to student loans and allow students to spread out their payments over a semester or school year without accruing interest, the CFPB has found that they may also come with high fees and the potential for accumulating debt.
The report assessed the tuition payment plans of nearly 450 colleges and universities and found that 89% of them charged enrollment fees, with some as high as $250. Additionally, 44% of the schools imposed late fees, and two-thirds charged returned-payment fees. These fees can significantly increase the cost of the installment plans and, in some cases, lead to annual percentage rates as high as 237%.
Furthermore, the CFPB found instances where missing a single payment could result in the entire balance becoming due. Some schools even convert no-interest plans into interest-bearing loans when payments are missed. Certain colleges also employ tactics such as withholding transcripts, removing students from classes, or evicting them from dorms for late payments.
The report also highlighted the lack of transparent disclosure of the terms and conditions of these payment plans. Students may have difficulty understanding the nature of the plans since information is often scattered across multiple documents and webpages.
CFPB Director Rohit Chopra urged colleges and universities to review their repayment plans to avoid subjecting students to high fees and coercive debt collection practices. While colleges may argue that these plans are not loans, the CFPB considers them an extension of credit and expects clear terms and conditions to be provided by educational institutions.
This report comes after the CFPB announced its intention to examine colleges and universities that extend private loans directly to students. This suggests that the enforcement agency may take action against schools that violate consumer financial protection laws, although no specific actions have been mentioned thus far.
In conclusion, while installment plans for college tuition offer an alternative to borrowing, students need to be wary of the fees and potential debt that can accumulate. Clear disclosure and fair practices from educational institutions are essential in protecting students from excessive financial burdens.
– Consumer Financial Protection Bureau (CFPB) report