Higher education tuition payments and overdue fees are under increasing regulatory changes and scrutiny today, presenting a daunting challenge for accounts receivables teams. The challenge, says Cheryl Mazeski, compliance consultant for ECSI, is that many schools don’t see themselves as lenders or regulated entities.
But that’s changing.
“The Consumer Financial Protection Bureau shared supervisory highlights aimed at student loan financing in 2022, and we’ve seen that focus grow ever since,” says Mazeski. “They’re looking at more than just traditional student loans — they’re also looking at new ways students are paying for school like payment plans. Ultimately, this has created a disconnect between how regulators see schools and how schools see themselves.”
Payment plans, for instance, offer significant benefits to students who need a longer timeline to pay tuition and fees. However, offering a payment plan puts higher education institutions in the position of a lender extending credit to students — which introduces new rules, regulations and standards of compliance. Many schools don’t have the resources to vet these kinds of issues, and it can be hard to find accurate information because the rules are so new.
What can accounts receivables administrators do to prepare themselves for this scrutiny without adding more to an endless to-do list?
To better understand accounts receivables policies and communication strategies in higher ed, ECSI partnered with Higher Ed Dive to survey more than 150 representatives from both public and private institutions. The results point to several areas where receivables administrators will want to focus to ensure their tuition and fees recovery process is compliant, effective and — most importantly — student-focused:
Transcript holds
Historically, transcript holds were an effective point of leverage for institutions navigating accounts with past-due balances. However, new legislation from the Department of Education is banning institutions from holding transcripts in most situations. Losing that leverage presents a challenge for institutions looking to recover potentially significant past-due fees — 7 in 10 survey respondents (72%) say the dollar volume of their past-due (tuition and fees) receivables portfolio is $1 million or more.
“If transcript holds were your only lever to enforce payments, you’ve got a problem,” says Mazeski. “It may be possible to construct a transcript hold that meets the new requirements, but schools need to be very careful in designing such a policy. And, since the oversight and regulation in this area are only increasing, it makes sense to address this challenge proactively by building a strong, compliant account recovery policy that doesn’t involve transcript holds.”
Data privacy
Schools are rightfully sensitive about student data privacy, often negotiating significant security measures with technology partners and vendors from a contractual perspective. However, when it comes to managing student’s financial data, staff don’t always have a full understanding of privacy requirements. And if a school doesn’t have the dedicated resources to stay on top of changing regulations, there can be a gap in the protection of student data.
“Regulators see students as a vulnerable sector of the population in need of protection,” says Mazeski. “They want to see over-communication on behalf of institutions and to have proof that students understand what they’re getting into when entering a tuition payment agreement. They also want to see student academic and financial data treated with the same protections any consumer might expect.”
Communication and consent
When an institution extends credit or payment terms to a student, how and when they communicate with that student is very important. Institutions unused to thinking of themselves as regulated financial entities may find their policies or processes lacking or non-existent. Only 40% of survey respondents say general counsels have reviewed their institution’s delinquent account outreach process.
“When regulators look at communication, they look at the whole lifecycle of the exchange between institution and student,” says Mazeski. “Are students being treated fairly and given good guidance? Are there any written, emailed or phoned-in complaints? Schools run the gamut in how prepared they are to deal with this kind of scrutiny and how much they can manage internally.”
Communicating with students about tuition and fees also creates the need for more consistent and standardized processes. For example, how are institutions communicating with students about their accounts, due dates and the consequences of being past due?
Kristy Pritchett, director of student account services at the University of Alabama, turned to ECSI’s RecoverySelect, a comprehensive solution designed to manage past-due accounts with compassionate customer service. She found that working with a teammate like ECSI streamlined the process and made it easier for both administrators and students to understand how it worked.
“Previously, our institution struggled with monitoring and collecting past-due accounts,” says Pritchett. “Repayment counselors used multiple letter templates, leading to inconsistencies and a lack of standards in communication. RecoverySelect streamlined these processes, using just five letters and phone calls to keep clear and consistent communication with students.”
Policy transparency
Communicating financial responsibilities to students clearly should be a key priority. Transparency about the details of a payment plan and the collections process builds trust and understanding between the student and the institution, making a positive outcome more likely and making students feel supported throughout the collections process.
“Rather than punishing students for falling behind on payments with collection agencies and academic holds, we wanted to help them be in control of their student finances,” says Pritchett. “One of our priorities was maintaining a positive student experience throughout the debt recovery process, and working with RecoverySelect has resulted in positive feedback across campus and renewed trust between our students and the institution.”
Prepare for accounts receivables scrutiny now
Staying ahead of dynamic compliance and regulatory requirements in higher education is not just a matter of legal necessity — it’s also integral to institutions’ financial stability and reputation. If an institution doesn’t figure out how to navigate these compliance challenges, it could face reputational harm, fines and more.
While the journey toward compliance will require ongoing attention, partners and available resources can help higher ed institutions achieve a consistent, compliant and supportive accounts receivables process that keeps the institution financially sound and its students enrolled and engaged.
For more insights on accounts receivables policies and outreach strategies in higher ed, check out the full survey report.
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