Students squeezed by the crisis, credit cards become too dear to pay for tuition

Students are getting constrained in using their credit cards all over the United States. Starting today students at the University of Southern Maine who pay tuition with cards will be charged a 2.75% processing fee. George Mason University, Northwestern University, Wichita State and the University of Virginia are among other educational institutions who have adopted or are adopting similar practices.

As a logical implication of the ubiquitous downturn environment colleges are suffering hard times and have to cut their costs using all available means. Usually when students used credit cards, universities assumed an average of 2% to process the transaction, according to Nilson Report, a payment systems newsletter. Now colleges are increasingly re-considering these policies and want to shift costs related to card processing on students.

According to the studies conducted by the National Association of College and University Business Officers in 2007 26% of colleges charged a credit card payment fee, either directly or through a third party, up from 14% in 2003.

Elizabeth Brock, a controller at George Mason University, says that 50% of students there make payments for their education with their cards. She thinks that the 2.75% fee imposed on students will cause them to use other payment options. Meantime Brock estimates the school will save $1.5 million a year from its new policy.

"A high percentage of our students and parents who used a credit card (did so) because there was no incentive not to," says Brock. Students can still pay their tuition by credit card — through TouchNet, a third-party provider — she adds, but, "It's not going to be cheap."

TouchNet accepts MasterCard, American Express and Discover, but not Visa, President Dan Toughey says, because of Visa rules that prevent it from passing the credit card processing fee on to consumers. Visa spokeswoman Randa Ghnaim says it doesn't allow merchants to charge consumers processing fees because they're "unfair."