Colleges and universities are making it harder for average American families to afford higher education, while making it easier for the wealthy

Even at Swarthmore, which runs its plan in-house, the fee is 2.6 percent, or an extra $1,330 a year...

The Hidden Costs of Higher Ed
By NOAH S. BERNSTEIN
New York Times
August 21, 2011

OVER the next few weeks, millions of Americans will be heading off to college, and despite the promise of need-blind admissions, more of them than ever will be struggling to pay for it. It’s not just the economy’s fault: even as they publicize lavish financial aid packages, colleges and universities are making it harder for average American families to afford higher education, while making it easier for the wealthy.

In the past, families and students covered their tuition with lump payments at the beginning of each semester. To ease the burden of such large bills — recent data shows that tuition and fees have increased 439 percent from 1982 to 2007 — many colleges have instituted monthly payment plans, while charging zero interest. Even many families that could afford to pay an entire semester upfront find such plans appealing.

Though such plans have undoubtedly allowed a greater number of modest-income students to go to college, they can actually end up unintentionally raising tuition costs. While the plans typically don’t charge a fee for payments made by check or direct deposit, they tack on a hefty charge for credit card payments.

Why? Because most institutions outsource the management of their plans to private companies, which have to make a profit. They charge universities a fee for processing credit card payments, and the schools pass those costs on to students and families, amounting to over a thousand dollars or more per year in some cases.

For example, some of the top liberal arts colleges in America, including Williams, Amherst and Wellesley, use a company called Tuition Management Services, where the fee is 2.99 percent for each payment made by credit card. At Amherst, where tuition, room and board cost $53,370, that’s an extra $1,595 if all payments are made by credit card. Even at Swarthmore, which runs its plan in-house, the fee is 2.6 percent, or an extra $1,330 a year...