Some years ago, when it was clear that my oldest daughter would be going to college, I became aware the university had a payment plan that would allow me to pay the “parental contribution” in (somewhat) easy monthly payments. At that time I had been putting a lot of money, much more than 10% of my annual salary, into retirement savings. I saw that the best way, really the only way, to pay my share of my daughter’s college costs was to reduce the amount going into retirement savings and use that money to make the monthly tuition payments. In fact, I had known that I was putting an abnormally high percentage of my earnings towards retirement and had been expecting that some of that money would need to be sent to college with my daughter.
What I hadn’t realized was that a fee was charged for using the payment plan. The choice was either (1) pay the entire amount due for the semester in one payment, or (2) make multiple payments and be charged a tuition payment plan fee. As best I can recall, the payment plan fee was $75 per semester. $150 per year. $750 over the course of five years.
Paying the fee always bugged me, because if I had known about it ahead of time, I could have set the money aside before the first payment was due. In terms of my annual spending, it really doesn’t matter if I send the money directly to the university via monthly payments in July-August-September-October-and-November or if I set the money aside in March-April-May-June-and-July and then send it to the university in one lump sum. If I had known about the fee, I would have saved up in advance and paid for the first semester in one payment, thus saving the fee. Then, during the first semester I could have saved for the second semester, and so on. That would have saved me $750. As it turned out, I never was able to save all of the total cost of a semester so I had to sign-up for the payment plan each time, twice each year.
It was all just a matter of poor planning (due to incomplete knowledge) on my part. As I actually did it, I paid about $1,000 each month from July to November and then the same amount each month from December to April. Clearly, what I should have done was set aside a portion of the needed funds each month starting in February or March. That would have been enough to make one payment for the first semester in July, thus avoiding the dreaded fee.
My second daughter started college this past Fall. I paid for her first semester in full in August. I’ll pay for her second semester later this week. As an extra bonus, I’ve been able to use the tuition money I’ve set aside to score a $200 bonus for opening a savings account at an online bank. Thus, with a little planning and saving, in the first year, I’m ahead by $300, which is $100 in saved fees ($50 per semester this time) plus the $200 account-opening bonus.
