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Business Officer Magazine

No Postage—Or Paper—Required

Migrating from paper billing to electronic billing and payment requires careful consideration of institutional culture and technical capabilities.

By Karla Hignite

UM is not alone. More colleges and universities are opting for electronic billing and are promoting the convenience of electronic payment for students and parents. As with the migration of so many student transactions to an online environment, e-billing simply makes good sense. No one can argue the fact that it’s significantly speedier and is reams less wasteful than traditional paper billing. But it’s also not without its technical questions and customer service challenges, as a variety of institutions can attest. 

Degrees of E-billing

Although UM is virtually 100 percent electronic with its billing, exceptions do apply. For those who are not currently enrolled but who owe tuition, UM reverts to a paper bill, since these individuals are less likely to check an e-mail account, explains Selander.

Likewise, UM’s 65,000 full-time enrolled students—including 51,000 at its Twin Cities campus—may appeal the e-billing process. The university has made clear the reasons for which it will approve a request for paper billing. Those include disability and lack of Internet access. During the course of two years, only 63 appeals have been made—about half of which have been approved, says Selander.

Less aggressive approaches for implementing e-billing include an opt-in strategy, where students must sign up for the service, and an opt-out strategy, which automatically subscribes students but allows them to unsubscribe to continue receiving paper bills. In both cases, adoption rates by students may be significantly lower and slower to build.

Knox College, Galesburg, Illinois, implemented its opt-in option as of July 2005. Students can sign up for electronic bills through their student accounts. “I suppose we are ‘Knox nice’,” says Bobby Jo Maurer, the college’s controller. “We didn’t want to jump in and require that everyone do this.” About 10 percent of Knox’s 1,200 students hail from 30 countries outside the United States. According to Maurer, a primary driver for implementing e-billing was to enhance service to all students but especially to international students, since access to e-mail and Internet could allow them to receive bills much faster than by postal mail service during school breaks. Prior to the summer break, the college sent an e-mail to all returning students alerting them to the e-billing option. “We captured 5 percent of the student body right from the start,” Maurer notes.

According to Kevin Barney, vice president of sales and marketing for Tuition Management Systems Inc., one real benefit of e-billing is that it allows institutions a more cost-effective way to get bills into the hands of the actual bill payers—often someone other than the student—in a manner consistent with federal requirements. To comply with FERPA and the Gramm-Leach-Bliley Act, bills must be directed to students only. E-billing accomplishes this while also allowing a student to grant access to someone else to view or pay the bill, explains Barney. In his view, a potentially bigger benefit of e-billing is that it allows an institution to leverage a new set of payment vehicles for getting student bills paid on time.

Paperless Payment

In addition to viewing current and past bills, UM students can pay bills online or authorize third parties such as parents to make electronic payments on their behalf. E-payment—which includes electronic transfer of funds from an individual’s checking or savings account or payment by credit or debit card—is often functionally paired with electronic bill presentment. But unlike e-billing, e-payment can’t be mandatory, says Selander.

UM offered e-payment options from the outset, and students responded. In July 2003, during the first month of inception, 15 percent of students paid electronically. Those percentages steadily climbed during the next six months until 50 percent of students’ payments were made electronically as of January 2004. One year later, the volume had climbed to 63 percent and currently has leveled off between 60 and 65 percent.

Nearly 90 percent of Frostburg State University’s 5,400 students pay their bills electronically, according to Roger Bruszewski, vice president for administration and finance. Two years ago the university system of Maryland and its board of regents embarked on an efficiency and effectiveness initiative. One potential cost-saving category that was identified included student billing. The time was ripe for improvements in that area, says Bruszewski. “Our software was old, we needed to change our payment plan, and our fees associated with credit card transactions had gone through the roof.” After exploring self-service options, Frostburg became the first institution in its system to implement campuswide e-billing as of July 2005.

University of California–San Diego (UCSD) activated its e-billing and e-payment capability in March 2003. During the first year close to 18 percent of students participated. “We’re now closing in on 40 percent of students using e-payment, with a target of 50 percent by 2008,” says Mark Cooper, director of student business services. With a combined graduate and undergraduate student population of about 25,000—up by 5,000 from five years ago and projected to swell to 30,000 by 2009—Cooper says the drawers full of paper checks that ultimately took weeks to process was impetus enough for implementing electronic billing and payment at his institution.

Spelling Out Specs

Waving Goodbye to Paper

According to Julie Selander, the University of Minnesota would not have implemented across-the-board e-billing if administrators had not believed that the students would be comfortable with the process. “We had already developed a strong Web culture with our student accounts and other self-service functions, so this seemed an obvious progression,” says Selander, senior associate director of UM’s One Stop Student Services. Even so, UM staff planned from the start for a full-scale communication effort.

Part of an effective communication plan includes informing not only students, but also parents and college stakeholders, says Selander. She developed a spreadsheet to capture specific messages for distinct audiences using a variety of communication vehicles and events. For parents, this included separate messages crafted for UM’s parent orientation as well as for UM’s parent newsletter, Web site, and e-mail discussion lists. Selander’s matrix also identified the individuals or departments responsible for communicating each message. Flyers, billing inserts, student orientation packet stuffers, and welcome kit CDs were among the communication vehicles rounding out UM’s promotional campaign.

While UM’s e-billing system was up and running as of June 2003, the university used the summer months as a break-in period. “We decided that if we communicated to returning students before they left and then eased in with this new option over the break, then by the time students came back in the fall they would be on board with this new feature,” Selander explains.

The University of California–San Diego launched its e-billing and e-payment options in March 2003 but continued sending paper bills until October 2005. “We wanted to make sure the process was working and that students were comfortable with it,” says Mark Cooper, UCSD’s director of student business services. The October statement included a notice to students that the bill in their hands would be their final paper bill issued by the university.

“Given the widespread acceptance by students for applying to schools and registering for classes online, student billing is one more transaction that simply makes sense to make electronic,” says Cooper. Like UM, UCSD’s promotion efforts went well beyond the student body. During parent orientation earlier this year, Cooper provided e-billing and e-payment demonstrations to 5,000 parents, walking them through the process.

Similar to UM, Frostburg State University announced its switch to e-billing this past spring to all continuing students. Letters were sent home to parents during the summer. Orientations for incoming freshmen and for parents explained the e-billing process and rationale. As of September, Frostburg shut off the paper flow completely. “No matter how you implement e-billing, be ready to do some solid marketing internally to your campus offices and faculty as well as to students and parents,” says Roger Bruszewski, Frostburg’s vice president for administration and finance. “Explain what you are changing and why, and emphasize the self-service, efficiency, and cost-saving components.”

Ultimately for Selander there was no greater satisfaction than this: Once UM flipped on its e-billing option, the university received its first electronic payment within eight minutes.

UCSD launched its e-billing option following a nine-month development process. When the university submitted its RFP in May 2002, Cooper knew some vendors wouldn’t bother to bid. “A good portion of vendor revenue comes from the bill notification and collection process, and we knew we didn’t need that,” he says. “We didn’t want a standard off-the-shelf implementation, and we already had a strong IT infrastructure and the internal support to build the kind of interface we wanted to maintain in-house.”

What the university did need was a provider to help the campus develop an implementation strategy for real-time e-billing and e-payment operations. Staff couldn’t be more pleased with how smoothly everything now works, Cooper says. When a student logs in to the university’s Web site to enroll in classes, billing information associated with registration is immediately captured and charged to the student’s account. The student is then directed to an option to pay. When the student chooses to pay, payment information is sent to the vendor. Confirmation with a receipt identifier is then returned from the vendor and posted to the university’s mainframe. Payment is also immediately reflected on the student’s account, and the student receives e-mail verification. “All this can take place during the same session if the student chooses to pay right away,” Cooper notes.

In the case of UM, staff knew they wanted to implement both e-billing and e-payment from the start. More pressing for them was thinking through whether the university had the internal resources to build and host the system. “We did have the in-house capabilities, but we also looked realistically at the other projects on our plate and what might not get done in lieu of this,” says Selander. Another factor that weighed in was the quick time frame in which UM wanted to implement e-billing. Once the university settled on a vendor in February 2003, it hammered out parameters by April and went live with its e-billing capability 10 weeks later.

While UCSD students remain on the university’s Web site throughout e-payment transactions, UM and Frostburg students enter a hosted site. In both instances, however, vendor sites employ university colors, fonts, and logos to provide a seamless experience. All three institutions use their existing authentication processes so that students can plug in the same ID and password to review and pay bills as they do for any other online transaction.

Real-Time Savings

Savings in time and money coupled with more efficient and convenient service to students are primary drivers cited for pursuing e-billing. One obvious upside for UM and for the growing number of colleges and universities implementing e-billing and e-payment options is immediate cost savings. According to Selander, UM now saves about $50,000 annually from eliminating the paper and postage associated with more than 250,000 hard-copy bills. After subtracting its outsourcing fees, Frostburg is netting about $130,000 in savings on approximately $35 million charged in tuition and fees and room and board, says Bruszewski. And Cooper estimates that UCSD stands to save close to $125,000 a year on postage, paper, and related staff time.

Since March 2003 when UCSD launched its use of e-check—an option allowing electronic payment from a checking account using the ACH (Automated Clearing House) service—the university has processed more than $100 million in e-check payments. According to Cooper, if those same payments had been processed via credit card, associated merchant and bank fees would have exceeded $2 million—reason enough to maintain UCSD’s policy against allowing credit card payment, says Cooper.

For Frostburg, elimination of the merchant fee for credit card transactions that the university previously paid has yielded significant savings—to the tune of $185,000 annually. Frostburg students and parents may still pay via credit card, but the fee is passed back to them through the university’s third-party provider. According to Bruszewski, only a few put up an initial fuss with the change.

Selander continues to hear arguments for allowing credit card payment, primarily from UM parents who are attracted to the convenience and the frequent flyer miles awarded. “We’re always exploring it. But in truth, we don’t have a huge push from our students for this,” says Selander. The university’s policy has always been against accepting credit card payment for tuition and fees, in large part because of associated costs and concerns about rising student debt.

While Selander admits that allowing credit card transactions might boost the percentage of those making payments online, for now she is happy with the volume of electronic payments being made. She credits that success to the strong Web culture of the institution and to UM’s comprehensive communication effort (see sidebar, “Waving Goodbye to Paper”). And Selander believes that as future classes of incoming students enter the university attuned to electronic transactions, the number paying electronically will naturally rise.

As for other e-billing benefits, a less tangible—though noticeable—byproduct is fewer instances of insufficient funds, says Selander. “Payment is still transferred from a checking or savings account as before, but because individuals are going online to direct their payment, they are more apt to ensure that enough money is in their account because of the perception that this is a real-time transaction.”

E-billing also allows for getting the billing notice to students and parents at least a week earlier, says Cooper. “Many late fees are the result of a short time period allowed for payment. For most universities with full consolidated billing that includes everything from tuition and housing to bookstore and parking fees—by the time all those charges are gathered and posted and a bill issued, this inevitably creates delays on the back end in receiving payment on time.”

Enabling Electronic Services

Don’t Miss March Conference

Electronic billing and improving collection of student receivables are among the cost-effective initiatives to be explored at NACUBO’s fourth annual Student Financial Services Conference, March 5–7, 2006, in Memphis. Through educational sessions and informal exchanges with colleagues from all types of institutions, participants will find solutions to challenges ranging from integrating student financial services operations to providing better customer interface.

Recognized as the most comprehensive event covering the business of student financial services, the program offers multiple tracks providing information about loan management, federal policy updates, leadership and change management, and the latest in systems and technology. Join fellow business officers, bursars, and financial aid professionals to learn about best practices and innovations. For more information or to register, visit or call 800.462.4916.

Important to the adoption of any e-billing system is laying the groundwork to make it successful. That includes a strong Web culture and electronic services environment. UCSD already had a well-established student Web portal through which students log in to register for classes and access account information and grades. Frostburg students are also well versed in online self-service. In addition to tuition and room and board, students can pay parking citations and permit fees; library and bookstore charges; and application, acceptance, transcript, and testing fees online.

Based on organizational culture, each institution must also find the right balance in launching full-scale electronic student financial services while still accommodating those who prefer tangible paper transactions. “If students don’t have access to a computer and want a paper bill, we will send them one, but we first point them to our 24/7 computer lab where they can print a copy of their bill,” says Bruszewski. He says Frostburg won’t implement such a policy anytime soon, but at some point in the future it may decide to charge students for paper copies of their bills. “Once you implement an operational efficiency such as e-billing, you have to encourage behavior in that direction,” says Bruszewski.

According to Cooper, UCSD students who don’t wish to pay online are directed to a printer-friendly version of their bill that includes a check remittance panel. Students are asked to submit this with their payment. While paper checks must still be processed manually, an optical reader can scan the remittance stub and automatically apply payment, streamlining the paper process significantly.

The next step in Frostburg’s attempt to achieve a paperless payment environment will be activating a voice response method. The first phase will have students and parents talking to a live person, but in the future an automated voice system will complete the transaction, says Bruszewski.

Payment features that UCSD recently added to its site include a link to university admissions. Cooper is undeniably excited by the greater than 90 percent of application fees being deposited electronically by prospective students: “That bodes well for increasing the university’s e-payment adoption rate through incoming students already exposed to electronic payment.”

E-billing Basics

According to Selander, when it came time to look for an e-billing provider, UM focused first on finding a flexible, easy-to-use system and ensuring that a vendor could handle the large volume of transactions associated with the e-billing process the university wished to implement. Selander and other university staff likewise researched technology requirements and costs of vendor products and how those would interface with in-house accounting and payment processing systems. They analyzed deployment timelines for bringing the system live and queried vendors about post-implementation support to ensure the vendor would help troubleshoot any problems.

On Board for E-billing?
Has your institution considered or made the move to e-billing? Tell us about the pros and cons of using a paperless system; e-mail

As for bill creation, Selander suggests that institutions pay close attention to the formatting of electronic statements to ensure that scan lines are legible when printed. That includes using the right fonts and adequate white space. Doing so can go a long way toward avoiding problems that ultimately result in wasted time and money associated with manually processing unreadable payments, says Selander. She suggests ample testing prior to launching e-billing and e-payment options.

Her final tip: Create benchmarks and proposed savings based on different variables. For instance, UM outlined scenarios that included 100 percent e-billing with a 30 percent e-payment response rate versus a 60 percent response rate. “It took us less than a year to realize a return on our purchase of software based on the cost savings from implementing e-billing and e-payment,” says Selander. “Forecasting takes a lot of work upfront, but it can help you define your best option and projected timeline for recouping your costs.”

Yet, even before outlining e-billing opportunities, institutions must first build the right team to brainstorm those options. For Frostburg, the frontline staff represented all functions of the process and included Bruszewski’s associate vice president for finance, who spearheaded the team, along with the bursar, comptroller, chief information officer, and database administrator. Bruszewski’s involvement came at the strategy level to help flesh out changes to the university’s credit card policy.

Find a Partner
A useful place to begin identifying private resources to assist with tuition payment operations is the Campus Buyers Guide located in the Corporate Connections section of every issue of Business Officer.

UCSD’s team likewise included the varied perspectives of registrar, accounts receivable, accounting, cashier, customer service center, and the university’s IT group, including mainframe and Web site staff. “From the start this was a joint effort by our vice chancellor for business affairs and vice chancellor for student affairs—both of whom were guests of honor at the luncheon celebrating our launch,” says Cooper. A student focus group, involved throughout in an advisory capacity, provided a necessary reality check, he adds. “They were especially helpful with concepts regarding screen design and navigation.”

And, not to be underestimated is the importance of a strong partnership between the business office and IT, says Cooper. “We worked hard to outline our requirements. In a sense, they had to give us some control over the look and design and we had to trust them to determine which technologies best served our needs.” The entire process was an exercise in discussion, compromise, and testing that included plenty of back and forth, he notes. “You can’t throw this over the fence and say, ‘Build it for us.’ You need real cooperation to make e-billing attractive to students and to make the process work to the satisfaction of everyone involved.”

Author Bio Karla Hignite, principal of KH Communication, Tacoma, Washington, is senior editor of Business Officer.