Over the past 15 years, I’ve spoken to hundreds of school leaders.  During that time, a handful of schools told me they dropped their tuition management provider because parents would complain that the company charged them a fee to give them a call because the company hadn’t received their payment, and they paid their tuition before the due date.  They took the process “in-house” so they could have better control over the process.

Unfortunately, doing so resulted in more work reconciling statements and preparing invoices to families, not to mention making those difficult phone calls to follow up with families that weren’t fulfilling their payment obligations and promises (even though they might have signed some type of agreement that said they would) themselves!  Schools were also absorbing fees associated with credit card payments, and were being charged NSF fees by their bank if the parent’s tuition check “bounced.”

What happened?  Taking the process “in house” cost them MORE money, in terms of both real dollars and time that was taken away from other critical tasks.

So is there a “better way” to handle this important function of a school’s office?  After all, the school should be in the business of chasing enrollment to grow the school, and not chasing tuition.

If families are making monthly tuition payments, it means they’re not financially able to pay their tuition obligation before the school year begins.  There are some schools that have a relationship with a bank that offers them direct debit services.  Unfortunately, all the work of reminding and following up with families is still the school’s responsibility, so what looks like a cost savings is really a time and energy vampire.

Other schools use a credit union since the lending entity offers a low rate of interest to the parent.  While the school receives their monies before the school year begins or in one lump sum, there are four issues that are associated with such a practice:

1) The school usually guarantees the loan, so if the parent fails to repay their obligation, the school must repay the loan to the lending institution.  That puts the school in the potential predicament of needing to repay a financial obligation (as a co-signer would), rather than “writing off” the debt.

2) While the parents are charged a minimal amount of interest, the transaction is a loan, which will affect the parent’s credit score – especially if they fail to honor their payment commitment.

3) In today’s banking environment, banks are bought and sold.  If the bank your school is using changes, chances are you’ll have to migrate everyone to a new platform, which means more work for you, re-inputting parent banking information and parents agreeing to different terms and conditions.  This is fine if it happens over the summer…but what if it happens in February?

4) Charging interest to brothers and sisters in the faith can be considered to be going against Scripture.  In Exodus (22.25) and Deuteronomy (23:19), God commands that we are not to charge our brethren a single penny in interest on a loan.

5) You’re doing all the follow up work, and making an exception for a parent’s unforeseen circumstance means even MORE work for you!

Some schools which use that bank for direct debits will generate invoices from their financial software if parents want to pay by check, and/or will allow parents to use a credit card to pay their tuition over a series of months during the school year.  Adding invoicing and credit card options requires a significant amount of manual work by an employee of the school or affiliated parish or church that’s usually not realized until one starts doing it.

If parents’ accounts are direct debited, and there’s not enough in the account to cover the debit, or if they write a check that goes NSF, your school will probably get charged a fee by your bank.  Further, remembering to set up the direct debits every month, or following up with families that don’t follow through on their payment obligations takes time and effort.  If a parent can’t pay their tuition due to hardships, mounting bills, or other unexpected expenses, ESPECIALLY in our current financial environment, they expect the school to “understand their circumstances” and accommodate their needs…or they’ll leave.

That brings us to late fees.  Late fees are seen as punitive, and parents today don’t like to be punished for circumstances they believe are out of their control.  The other issue is that while some schools are comfortable charging a $10 late fee, the reality is that if a tuition payment is $300 or more, another $10 may not be that “substantial” to encourage families to pay on time.  Further, $10 on $300 is 3.33%.  If the fee a credit card company charges is 2.95%, it will cost the parent almost the same amount of money to make their payment via a credit card, so there’s no real “incentive” to pay the tuition payment on time.  Unfortunately, raising the fee to something substantial is even more punitive, but can make school board members and administration feel uncomfortable.

Here’s the key word to remember – “incentive.”  For most of the past 40 years, the “incentive” to pay on time was to avoid the punishment.  Interestingly, that mindset was effective with members of the Silent Generation and Baby Boomers.

Generation X and the Millennials are different.

WAY different!

According to “Generation X Work Ethics: A Study of Generations” (http://www.brighthub.com/office/career-planning/articles/80553.aspx), Kellen Kautzman states:

There is a strong independence in the mindset of Gen X’ers as pointed out in the Harvard Business Review: “Gen X’ers will want to be free agents — negotiating their own deals, seeking incentives ranging from commissions to options, and switching employers at a moment’s notice.” (Sharp, Kelly. Baby Boomers & Gen X, at http://employee-management-relations.suite101.com/article.cfm/baby_boomers_gen_x_the_work_ethic_debate.)

This ability to switch companies has caused a great deal of anxiety in the corporate world, especially for the Baby Boomer who feels it is of the utmost importance to “be loyal and pay their dues” to a single company they can work a lifetime for.

Sadly, Gen X’ers had to watch their parents give everything to their jobs, only to be downsized at the end of their careers. They’ve seen corporations eliminate retirement pensions from loyal employees, leaving retirees with nothing.  Gen Xers nor Millennials, as we’ve seen, aren’t set on making the same mistake. They take time off, leave early if the job is done, and work to establish strong social connections as a high priority. Today’s worker’s work ethic (which is driving employers crazy) includes being more self-reliant (read: work from anywhere and not just home) and willing to jump from company to company because there may not be significant upward mobility potential within the company they’re working for.

Further, because of the coronavirus pandemic, people began rethinking what’s really important to them as they’ve seen loved ones pass away, while still others have had long-lasting after-effects as a survivor of COVID-19.  We’re now experiencing the effects the Great Resignation is having, connecting supply chain issues, product shortages, violent and tragic conflict, inflation and economic recession.

Expectations, therefore, can no longer be expectations.

What does this mean for your school?  There are still members of Generation X who are parents with children in high school, but those entering your school with Pre-Kindergarten children all the way through middle school and entering high school are, for the most part, Millennials.  They not only want to pay at a time of the month that’s convenient for them, but also want ways to pay that are convenient for them – like on their mobile device.  Both groups would like to see an incentive for paying on time, rather than being punished for a payment that might be a day late.  After all, you might want parents to pay their tuition on the 1st of the month…but the mortgage is due on that day, as well as the car payment and the electric bill.  If there’s not enough money to cover all those bills by that time, guess which entity will be their lowest priority.

If you’d like to see a couple of ways you can “incentivize” your school’s tuition, send an email to me by clicking or tapping this link with the words “Incentivized Tuition” in the subject line.  Include the school you’re associated with, as well as its location, in the body of the email.  These are the result of some “outside the box” thinking, but it’s really more of “different box” thinking.  And for your school to be considered unique in the marketplace, one of the hallmarks of being remarkable is being different.

© Michael V. Ziemski, SchoolAdvancement, 2014-2023