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Business Officer Magazine

From In Line to Online

Miami University switched to electronic payments and other Web-based student financial services. Customers are happy, and cost savings are bolstering the budget.

By Virginia Layton

However, we must be sure that when we offer these services to our customers, we are protecting their privacy while adhering to many other standards and areas of legislation surrounding students and businesses. Such protections include the Family Educational Rights and Privacy Act (FERPA), the Gramm-Leach-Bliley (GLB) Act, the Payment Card Industry (PCI) Data Security Standard (DSS), the Red Flags Rule, and others yet to be written.

March Conference Will Center on Student Services

National experts top the agenda at NACUBO’s Student Financial Services Conference, March 8–10, 2009, in Savannah, Georgia. Hear from Dennis Jones, president of the National Center for Higher Education Management Systems, on how changing demographics promise to affect higher education. Gain insights from Matt Hamill, NACUBO’s senior vice president, advocacy and issue analysis, on the political and economic environment. It’s all part of the workshop’s focus on the changing landscape of higher education as institutions cope with a faltering economy, concerns about affordability, and planning for an uncertain future.

Comprehensive content. This year’s lineup includes other plenary speakers who will help you understand and better serve low-income and first-generation students, factoring in the future of student aid. Concurrent sessions are designed to address ethics, emerging issues, and new approaches for improving student services and related operations. A consistent conference theme focuses on how you can use technology to improve customer service, increase efficiency, and save money.

Interactive format. Connect with newcomers and seasoned student financial services professionals from large and small institutions to share your successes and struggles. Network with faculty, fellow business officers, bursars, and student services and financial aid professionals. Find out how to comply with myriad new rules stemming from the Higher Education Opportunity Act and how to help military veterans pursue their dreams under the New GI Bill. Plan to meet with representatives from more than 30 student financial services companies to learn about the latest products and services.

In addition, don’t miss the chance to join our experienced faculty members in a more intimate setting for a concentrated learning experience on “Bursar Fundamentals,” a preconference seminar on Sunday, March 8.

To register or for more information on this and other NACUBO professional development programs, visit or call 800.462.4916.

Miami University, Oxford, Ohio, embarked upon a series of customer service enhancements after implementing its enterprise resource planning (ERP) product during 1999–2000. The critical Y2K period also included major upgrades to our information technology (IT) infrastructure across campus, enabling convenient Internet access in residence hall rooms (we have since migrated to wireless). Those improvements brought us not only integrated student, alumni, and financial systems, but also better hardware, connectivity, and networks. We were ready to move forward, continuing to use technology to enhance service to students, improve access to information, reduce costs, and expedite cash flow. Electronic services were already spelling the obsolescence of the lockbox, and we knew that our students would welcome a shift from waiting in line to going online for their financial services.

Also, in the larger picture, we wanted to contribute to the overall cost control of the university. After all, decreases in state subsidies in the early part of this decade, a slight dip in enrollment in 2006, and a tuition freeze for Ohio students had resulted in increased budget sensitivity. We began meeting these realities by offering services that would ultimately save money while providing new online student payment systems, increased payment plan options, more convenient alternative loan payment processing, and electronic funds transfer for student refunds.

Real Challenges, Virtual Payments

Our move to electronic payments was, in large part, customer driven. Students and their families clearly expected us to accept payment by credit card. Sound reasonable? Sure—everyone else accepts them. However, the challenge for higher education leaders is this: Tuition, fees, housing, and meal plans are big-ticket items, and credit card merchant fees are calculated using a percentage of the transaction. With Miami University's annual revenue of more than $500 million, if only 20 percent of payers chose to use credit cards, a credit card merchant agreement assessed at only 2 percent could easily cost us as much as $2 million annually.

While retailers can simply pass on to customers the cost of their merchant agreements by increasing prices for their goods, adding an extra $2 million or so to an already tight public university budget would mean a substantial increase in fees for all students. We chose not to do that. However, our decision was becoming increasingly unpopular with families as frequent flyer miles and other awards programs gained momentum.

We wanted to offer credit card payments for those looking for the convenience (and associated freebies), but we wanted to charge only those who used the service. We also knew that new standards allowing us to charge credit card "convenience fees" for Internet-based transactions were being established. Prudently, we decided to outsource this initiative, knowing that our service provider, acting as our agent, would be responsible for security, privacy, and compliance.

We then encountered an interesting series of events that would ultimately delay some of our online activity. After issuing a request for proposals, one of the vendors' responses indicated that we must charge the same percentage-based convenience fee for those paying by electronic check as for those paying electronically by credit card. Since we did not want to charge for check payments, we considered another provider, who indicated that by using separate Internet links we could charge a convenience fee for credit cards, while excluding extra fees for electronic checks.

After we successfully negotiated a contract, the credit card industry regulations began to tighten with the enactment of the GLB Act and the proposed PCI–DSS. At about the same time, Visa decided not to participate in the convenience fee arena. So, we implemented electronic check payments via the Internet in 2002 but abandoned credit cards with associated convenience fees until the air had cleared. We eventually implemented the credit card option in 2006, absent Visa and with the GLB Act and the PCI–DSS firmly in place.

Credit card payments now represent slightly more than 20 percent of our online payment activity. The customer-assessed convenience fees for credit cards range from 2.3 percent to 2.9 percent of the transaction.

In addition to offering customers the added convenience of credit card and electronic check payment options, online payments enable us to provide better service to parents and students who are last-minute payers: They no longer need to overnight checks to our office or pay fees for wire transfers.

The seamless integration with our student system facilitates our daily reconciliation process; the daily electronic transfer of funds minimizes "float" time and expedites cash flow; and the reduction in handling paper checks and mail saves time and resources. After we implemented electronic billing late in 2006, participation in online payments increased nearly fourfold. We were able to eliminate our bank lockbox service in 2007, saving nearly $50,000 annually in addition to the nearly $100,000 estimated savings of e-billing. (See figure for data on Miami University's online payment growth since 2003.)

Since we still handle the thousands of checks that we receive in person and by mail in our payment center each semester, we are investigating ways in which to cost-effectively streamline and expedite this process, as well. (See the related article "The Check's in Cyberspace," which describes the automation of check processing at Johnson County Community College, Overland Park, Kansas.)

Pick a Payment Plan

The convenience of paying tuition in installments is popular with our students and their families.  We originally used a labor-intensive and time-consuming process to accommodate students who wanted to pay by installments. With more than 25 percent of our 16,000 payers participating each year, we knew we needed to find a less cumbersome, more customer-friendly payment plan solution. We also needed to minimize the risk of potential default, so promissory agreements were a high priority.

Outsourcing our payment plans enabled us to provide additional payment options. For a small enrollment fee, families can select either a 10-payment annual plan or a 3-payment semester plan. Both are interest free. Families may initiate enrollment via the Internet or telephone, and may choose to have the installments automatically deducted from a bank account or charged to a credit card, along with a convenience fee. Of course, they may also mail their payments to our service provider.

We require that promissory agreements be completed by all payment plan payers, who frequently are parents, grandparents, or guardians rather than students. Our service provider initiates the agreements and retains and stores them electronically. They are readily available to us when a payer disputes or questions a debt and may be used as accompanying documentation in court cases, when necessary.

By carefully selecting our payment plan due dates, we have minimized potential negative impact on cash flow. The 10-payment plan installments begin on June 1, with the final payment due on March 1 of the following year. This allows us to place service-restrictive holds at appropriate intervals during the semester, which assist us with the strict enforcement of the payment plan due dates.

Our provider sends us frequent transfers of funds via electronic fund transfer (EFT), accompanied by data files that electronically update our student accounts system. The files contain two entries: one with the current payment information and another that defers the remaining installments due on the payment plan. If the payer is delinquent, the university's student account reflects the delinquency immediately.

Student Loans, Refunds, and More

With tuition costs escalating, more students find it necessary to obtain additional funds for educational expenses through federal and private loans. Consequently, we wanted to streamline these related processes.

Alternative (private) loan processing. The interest rates, credit requirements, and terms and conditions of private loans vary widely among lending institutions. Many colleges and universities prefer to work with lenders that present the best lending alternatives for the institution's students and include them on what is commonly known as a "preferred lender list." (The Higher Education Opportunity Act establishes additional disclosures and requirements for institutions that participate in preferred lender arrangements. Go to for details.)

While we will accept checks from any lending institution for payment of students' fees, we have worked with our preferred lenders to transfer funds to us electronically and provide corresponding data files to upload the payment information electronically to students' accounts. The ease in processing facilitates prompt reconciliation and provides quicker access to funds by students. And, of course, it further reduces paper check processing and handling in our payment center.

Direct lending. While Miami University implemented direct lending in 1996 when the process was inaugurated by the Department of Education (ED), the topic certainly bears mention in this discussion. Students are notified electronically when aid disburses to their accounts, as early as 10 days prior to the start of the semester. The Department of Education's G5 software system offers us the ease and convenience of drawing down federal funds electronically at the time that our initial financial aid is awarded, and weekly thereafter.

The result expedites cash flow to the university, provides prompt information and funds to students, and eliminates processing paper check payments from lenders. Although the reconciliation process with the ED may be cumbersome and detailed, the ease in administration and timeliness of funds received make it worth the effort.

Direct deposit of student refunds. With the implementation of direct lending in 1996, we also eliminated in-person distribution of student refund checks. At that time, we began mailing checks for all credit balances to students at their local mailing addresses. This presented challenges with the propensity for students to change addresses—sometimes multiple times per year—resulting in hundreds of lost and undeliverable checks.

Recent changes in Department of Education regulations surrounding cash management of Title IV funds require that any uncashed checks that consist of Title IV funds be returned to the ED within 240 days of the original issue date. In addition, new regulations allow colleges and universities to require direct deposit of student refunds, as long as we still disburse funds by check within the allowed time frame to students who fail to provide bank account information. These regulatory changes, combined with increased postage costs, are good incentives for us to move more aggressively to require the direct deposit of all refunds.

The original implementation of our ERP provided for electronic transfer of student credit balances to students' bank accounts. But, initially the process to solicit the required bank account information was paper-based, leading to concerns about the security of that information. In response to heightened security concerns and legislation such as the GLB Act, upgrades to our student system now enable secure, online sign-up for EFT deposit of student refunds.

This new functionality, coupled with changes to the Department of Education regulations effective July 1, 2008, make electronic refunds more feasible and practical. It also allows us to require students to use direct deposit, since we are able to assist them in establishing bank accounts, if needed, at our student credit union. We estimate that the additional savings to the institution will be approximately $42,600 (30,000 refunds per year, with postage, check stock, and handling costs of approximately $1.42 per mailed check).

The Business Office and Beyond

Migrating to new online processes streamlines our operations in ways we couldn't even have imagined 10 years ago. Our conversion has been a gradual one, partly due to the regulatory evolution surrounding electronic payment processing mentioned earlier, but also because of the thoughtful and thorough evaluation and negotiation required when selecting service providers. It was critical to articulate service expectations, and then, of course, to negotiate the best possible rates (fees vary widely among vendors, and the cost-benefit analysis was a very helpful tool in negotiations).

The process doesn't end when the agreement is signed, and we typically commit only to one-year renewable agreements, which help to hold our service providers accountable. The short-term contracts also allow us to conveniently opt out of an agreement that no longer meets our business objectives.

Other initiatives during the conversion included fostering a collaborative culture and developing knowledge workers who willingly rise to the task of retraining to use the new processes and software and are eager to take service to the next level. This environment allows us to seek and embrace change, now and in the future.

With the volatile economy and financial markets—and facing a year of expected budget cuts at Miami University—my staff and I are all the more proud of the nearly $200,000 in annual savings that we've been able to realize by instituting electronic processes. But, even more important to us is our ability to provide better, faster service and assistance to technically savvy and demanding students and their families who increasingly are accustomed to immediacy—and to demonstrate a vital part of our mission: to be "a student-centered public university."

VIRGINIA LAYTON is bursar, Miami University, Oxford, Ohio.