Higher education tuition payments and late fees are under increasing regulatory change and scrutiny today, presenting difficult challenges for accounts receivable teams. Cheryl Mazeski, compliance consultant at ECSI, says the problem is that many schools don't see themselves as lenders or regulators.
But things are changing.
“The Consumer Financial Protection Bureau shared oversight highlights targeting student loan debt for 2022 and confirmed that focus has only grown since then,” says Mazeski. “They’re looking at more than just traditional student loans. We're also looking at new ways for students to pay for school, such as payment plans. Ultimately, this has created a disconnect between how regulators view schools and how schools view themselves.”
For example, payment plans offer significant benefits to students who need a longer timeline to pay tuition and fees. However, offering payment plans puts higher education institutions in the position of lenders extending credit to students, which introduces new rules, regulations and compliance standards. Many schools don't have the resources to research these kinds of issues, and because the rules are so new, accurate information can be difficult to find.
What can accounts receivable managers do to prepare for these investigations without adding more to their never-ending to-do list?
To better understand higher education institutions' accounts receivable policies and communication strategies, ECSI partnered with Higher Ed Dive to survey more than 150 representatives from public and private institutions. The results indicate several areas that accounts receivable managers want to focus on to ensure that their tuition and fee recovery processes are compliant, effective, and most importantly, student-centered.
Transcript on hold
Historically, report card holds have been an effective leverage point for institutions navigating accounts with past-due balances. but, new law The Department of Education prohibits institutions from retaining transcripts in most circumstances. Losing this leverage poses a challenge to institutions trying to recover potentially significant late fees. Seven in ten survey respondents (72%) said their portfolio of delinquent receivables was $1 million or more.
“If withholding a transcript is your only means of enforcing payment, then you have a problem,” says Mazeski. “It may be possible to retain transcripts that meet the new requirements, but schools will need to be very careful when designing such policies. And as oversight and regulation in this area continues to increase, it makes sense to proactively address this issue by establishing strong, compliant account recovery policies that do not include transcript holds.”
Data privacy
Schools are understandably sensitive about student data privacy and often negotiate significant security measures with technology partners and vendors from a contractual perspective. However, faculty and staff do not always fully understand privacy requirements when managing students’ financial data. And if schools don’t have dedicated resources to keep up with changing regulations, there may be gaps in student data protection.
“Regulators see students as a vulnerable population in need of protection,” says Mazeski. “They want to over-communicate on behalf of the institution and have proof that students understand what they are going through when they enter into a tuition payment agreement. They also want students’ academic and financial data to be treated with the same protections that any consumer can expect.”
Communication and Consent
How and when an institution communicates with a student when extending credit or payment terms is very important. Institutions that are not accustomed to thinking of themselves as regulated financial institutions may have policies or processes that are lacking or non-existent. Only 40% of survey respondents said their general counsel had reviewed their institution's delinquent account support process.
“When regulators look at communications, they look at the entire life cycle of the exchange between the institution and the student,” says Mazeski. “Are students treated fairly and receiving good guidance? Do you have a complaint in writing, email or phone? Schools are very diverse in terms of how prepared they are for this type of investigation and how well they can manage it internally.”
A more consistent and standardized process is needed to communicate with students about tuition and fees. For example, how does your institution communicate with students about accounts, deadlines, and the consequences of missing deadlines?
Kristy Pritchett, Director of Student Account Services at the University of Alabama, chose ECSI's RecoverySelect, a comprehensive solution designed to manage delinquent accounts with compassionate customer service. She found that working with team members like ECSI streamlined the process and made it easier for both administrators and students to understand how the process worked.
“Previously, our agency had a difficult time monitoring and collecting delinquent accounts,” says Pritchett. “Repayment counselors used multiple letter templates, leading to inconsistencies and lack of standards in communication. RecoverySelect streamlines this process using just five letters and phone calls to maintain clear and consistent communication with students.”
policy transparency
Clearly communicating financial responsibilities to students is a top priority. Transparency about the details of the payment plan and collections process builds trust and understanding between students and institutions, increasing the likelihood of positive outcomes and ensuring students feel supported throughout the collections process.
“Rather than punishing students for delinquent payments to collection agencies and academic holds, we wanted to help them take control of their student finances,” Pritchett says. “One of our priorities has been to maintain a positive student experience throughout the debt recovery process. Working with RecoverySelect has resulted in positive feedback across campus and renewed trust between students and institutions.”
Prepare for your accounts receivable investigation right now
Staying ahead of dynamic compliance and regulatory requirements in higher education is not only a matter of legal necessity, but is also essential to an institution's financial stability and reputation. If an institution doesn't find a way to address these compliance issues, it could suffer reputational damage and fines.
While the journey toward compliance requires ongoing attention, partners and available resources can help higher education institutions achieve consistent, compliant, and supportive accounts receivable processes that maintain the financial health of the institution and student enrollment and engagement. This might help.
For more insight into accounts receivable policies and support strategies in higher education, check out: Full investigation report.