Many Happy Returns
The payoff for investment in electronic student account transactions: faster service, more efficient staff, and real cost savings. NACUBO’s recent benchmarking survey confirms the rapid shift to automated processes.
By Sandra R. Sabo
The empty bins caught the eye of Ava Brock, director of student financial services, just as the fall semester began at the University of Puget Sound. The liberal arts college in Tacoma, Washington, had always relied on those bins for sorting the checks that flooded in before classes started. This year, the bins remained on the shelf, unused.
"We don't need them anymore because we no longer receive enough mail-in payments to require sorting the full pays, payment plans, and incomplete pays," explains Brock. In FY08, the University of Puget Sound received 98 percent of its payments by paper check; by FY10, paper checks represented 44 percent of payments from its 2,600 students—a 55 percent decrease in three years.
Paper Fades Away
Other institutions that joined Puget Sound in participating in the 2011 NACUBO Student Financial Services (SFS) Benchmarking Survey may not have experienced such a dramatic decrease. Still, the move away from manual payments continues to pick up speed within higher education.
Another financing option for Iowa State University students: electronic gift certificates, available online in any denomination the purchaser desires.
According to the SFS survey, across all types of institutions, payments received by check accounted for 43.2 percent of dollar volume in FY10, down from 51.9 percent in FY08. Correspondingly, students' use of e-checks has nearly doubled during that same period, going from 9 percent of payments by dollar volume (FY08) to 17.6 percent (FY10).
"In the last five years, we've had a 36 percent decrease in manual checks while electronic payments have increased dramatically, going from $400,000 to $3 million annually," reports Ruby Brase, director of fiscal operations at Millikin University in Decatur, Illinois. Currently, two of every three dollars (66 percent) coming into Millikin arrive electronically.
Many of those e-payments are government loans, notes Brase, adding that 99 percent of Millikin's undergraduates receive some type of financial aid. But she also attributes the increase in e-payments to Millikin's introduction of a Web portal giving students one point of electronic access to their e-mail, broadcast messages, course registration, financial aid information, and account billing. "The account balance pops right up on the screen every time the student logs in, which helps focus attention on the balance. Then, the bill can be accessed with one click," says Brase.
Millikin introduced its Web portal in 2009, the same year that Iowa State University closed its cashiering area and lockbox. "Those were no longer needed because we had so little walk-in student traffic and so few transactions being mailed in," explains Joan Piscitello, Iowa State's treasurer. Today, about 96 percent of payments come in electronically, the majority through the university's AccessPlus Web portal.
Thanks to that high rate, Iowa State devotes only 25 percent of one staff member's time to processing payments—even though the university has a record enrollment this semester of nearly 30,000 students. For the few students who prefer to pay with cash, Iowa State has made arrangements with a local financial institution to issue a cashier's check at no charge, provided the check is made payable to the university.
It's no surprise that Iowa State students favor doing business electronically, because they have received their U-bills that way since 1998. At the time, Piscitello says, the move saved the university more than $100,000. "Over the years, going electronic helped us absorb the budget cuts related to state funding without having to lose staff," she adds.
Quicker and Easier
Like Iowa State, the University of Puget Sound relied on internal IT staff to develop its Web-based student accounts system. Known as Cascade, the homegrown system deployed in the mid-1990s, added Web billing and account information in 2005, and then slowly added e-payment and other capabilities. Electronic bills replaced the hefty billing packets mailed to returning students, leading to significant savings on paper, printing, and postage. Other offices took notice, and soon Cascade featured electronic housing forms, advising forms, and work-study applications.
"We were a little skeptical about going electronic, so we continued to handle initial billings and deposits for first-year students on paper until 2009," says Brock.
Even then, submitting the payments electronically was optional—yet the majority of incoming freshmen chose to pay their admissions deposits in that manner. Thanks to the e-payment option, deposits and initial term payments no longer trickle in long after the deadline, as they did with mailed checks. "We're now getting our numbers much faster," adds Brock, "and we know immediately which students have responded and who we need to pursue."
Once enrolled at Puget Sound, students can either pay the entire balance due before the semester begins or divide the balance into five equal monthly payments (plus an $80 participation fee). The university charges a 1 percent late fee each month for payments not received by the due date.
Although Johnson County Community College (JCCC) also offers a payment plan, it requires participants to identify the source of those payments up front. Students must enroll in the plan via the college's MyJCCC student portal, after agreeing to a $30 participation fee and to automatic withdrawals on specified dates.
"After setting up the first payment, students don't have to worry about their bill—the remaining installments are automatically taken from the payment source provided," says Gayle Callahan, manager of billing and accounts receivable at the community college located in Overland Park, Kansas. "We accept ACH [Automated Clearing House], debit cards, and credit cards."
Overall, she notes, credit cards account for 64 percent of JCCC's credit business. That number jumps to 77 percent within the college's continuing education area, where students must register and immediately pay for noncredit courses online.
"Those are high rates for credit cards, but we recognize that most people like using credit cards on the Web. And, for us, it's guaranteed payment," observes Callahan. Currently JCCC processes debit transactions in person; it plans to convert to a PIN-less debit system to encourage a greater use of debit cards, which carry lower fees than credit cards.
NACUBO's 2011 survey shows that JCCC isn't alone in its high volume of credit card transactions. The data reveal that credit card transactions—Web-based and in-person, combined—represent half (50.2 percent) of the dollar volume of payments received from students attending community colleges. Among all institutions, just over one fourth (28.7 percent) of payments received are charged to credit cards.
Among small institutions, 24.3 percent of student payments arrive via credit cards. One of the institutions in that constituent group, Millikin University, processes about $1.8 million in credit card payments annually, and that number has been inching upward.
"Credit card usage has been going up either because people want to earn points with their credit card company or delay payment further," says Brase, adding that Millikin accepts Visa and therefore is unable to charge convenience fees for credit card transactions. She continues, "We have a lot of first-generation students who may not realize there are other payment options, such as applying for a grant, so we really reach out to educate students and help them find payment solutions."
Concerns about student debt have prompted some institutions, including the University of Puget Sound, to steer clear of transactions using plastic. "We have never accepted credit cards for payment of tuition and fees," Brock notes. "We'd prefer that families consider an educational loan, which offers the lowest interest rates, than take on consumer debt that could have a negative impact on them for years." Not offering credit card payment for tuition, she adds, has allowed the institution to control operating costs, which directly affects its ability to control tuition increases.
Iowa State espouses a similar philosophy, having eliminated U-bill payments by credit card in 1989. "By not accepting credit cards, we're looking out for our students and telling them there's a better way to finance their education," explains Piscitello. "Instead of paying their U-bill with a credit card that carries a high interest rate, for example, students can look into an internal 12-payment plan, financial aid packages, and on-campus jobs."
Another financing option for Iowa State students: electronic gift certificates. Promoted as an easy way for family members and friends to help students pay for their education, the electronic gift certificates are available online, in any denomination the purchaser desires. Piscitello, who thought most purchasers would select $25 or $50 certificates, has been pleasantly surprised by the number who choose values of $1,000 or even $5,000. Since creating the program in 2009, Iowa State has sold $137,000 in electronic gift certificates.
"With the electronic gift certificate, we hold the money in an account for the student, like a mirror account. If something is charged to the U-bill, then the money is transferred to pay what's due," Piscitello says. Any value remaining on the gift certificate is refunded to the student when he or she graduates or withdraws.
That refund most likely will take the form of an electronic direct deposit to the student's bank account—the way Iowa State has issued its student credit balance refunds since 1996. Today, the university handles 98 percent of its student refunds electronically.
In fact, research universities are more likely to favor such electronic direct deposits. According to the 2011 SFS survey, direct deposits account for more than half (55.5 percent) of student credit balance refunds at research universities, compared to 27.6 percent at all institutions.
In contrast, small institutions are the most likely to issue paper checks for student refunds (representing 84.9 percent of dollar volume refunded) and the least likely to use electronic direct deposit (12.6 percent of dollar volume). The University of Puget Sound, for example, issues all credit balance refunds on paper checks.
After automating its refund process in December 2010, Johnson County Community College now relies on one employee to handle both paper checks and direct deposits-and the latter accounted for 56 percent of dollars refunded in FY10, up from 49 percent in FY09. In contrast, only 18.5 percent of refunds were made by direct deposit at the community colleges that participated in the 2011 benchmarking survey. "This September," Gayle Callahan reports, "of the 5,500 refunds we issued, 60 percent were electronically processed. In terms of dollars, 70 percent go into direct deposit."
Whenever a direct deposit occurs, JCCC notifies the student via e-mail or text message (if the student opts for that instead). "As soon as those messages go out, students immediately contact us with any questions or concerns—so we know they're using smart phones," says Susan Rider, JCCC's bursar and manager of business office services. "That's why we are looking into a mobile app students can use to make payments and view their account." Rider credits the college's financial aid office for talking up the advantages of direct deposit, such as receiving a refund several days before a paper check arrives and not having to stand in a bank line.
When speaking at Millikin orientations, Ruby Brase emphasizes speed as well as sustainability; the idea that direct deposit saves trees-and reduces the carbon footprint by eliminating mail delivery-typically resonates with college students. Millikin, which pays 47 percent of its credit balance volume by direct deposit, walks the talk by making W-2 forms available electronically to student workers and including direct deposit information with every paper refund check it distributes.
In her conversations with students and other administrators, Piscitello also touts the convenience factor. "Students don't have to worry if they move from one apartment to another or spend a semester abroad—the refunds will go right into their account in the U.S. and be available no matter where they are," she says.
Families' concerns about online fraud and identity theft present one stumbling block to greater acceptance of direct deposit. That's why JCCC no longer hosts its integrated student portal; to enhance security, the college recently moved to a hosted solution.
The bigger challenge, says Rider, is receiving accurate ACH information for setting up online transactions. "Typically, when we get a 'no account available' message," she explains, "it's because the student has typed in the account number incorrectly."
Because the same issue often arises at Iowa State, the university recently redesigned its direct deposit registration page. "Before, students would enter their data and verify it once. Now, we've gone to a double verification system for bank and routing information," says Duane Reeves, director of the receivables office at Iowa State.
Less Busy Work
As JCCC has steadily progressed away from manual payments and refunds, it has significantly reduced its busy time. As an example, says Rider, "It used to take us until mid-September to process all of the financial aid and general tuition refunds for the fall term. This year, we did it all in one week."
In addition to speeding up payments and refunds—and curtailing the overtime often associated with those transactions—going electronic gives SFS employees more time to spend with students. That may mean providing answers that students could find online but would rather hear in person, as well as explaining the intricacies of FAFSA, Perkins Loans, and the like.
"When people move to a more electronic process, they may think they're decreasing customer service," says Piscitello. She believes the opposite.
"My philosophy is that you're actually increasing customer service," Piscitello continues. "When you enable students to handle their own transactions online, you free your staff to provide the one-on-one counseling that helps students make better decisions about how to handle their money and finance their education."
SANDRA R. SABO, Mendota Heights, Minnesota, covers higher education business issues for Business Officer.