Does Unpaid Tuition Affect Your Credit Score?

What Happens if You Don't Pay Your College Tuition?

Before collections come into play, schools can take immediate action on late tuition. They may impose late fees and put your student account on financial hold. From there, unpaid tuition bills can bring on an escalating range of consequences, including the following:

• Registration hold: You'll be prohibited from registering for classes until your bill is paid and the hold is lifted.
• Transcript hold: You won't be able to have your transcript sent to potential transfer schools, graduate programs, employers or scholarship sources.
• Graduation hold: You may be unable to complete your degree or receive your diploma.
• Current classes: If your tuition goes unpaid for an extended period, you may be dropped from your current classes.
• Campus housing: Similarly, you may lose your student housing and dining hall access if your bill is seriously overdue.
• Collection expenses: If your account is sent to collections, the associated expenses may be added to your balance.
• Automatic payment plan: At some schools, unpaid tuition can trigger automatic enrollment in a tuition payment plan (more on these plans below).

Some states—including New York, California, Maine, Minnesota and Washington—have protections in place to prevent colleges from withholding transcripts or diplomas due to unpaid tuition. If you believe your transcript or degree are being withheld illegally, check with your state's attorney general's office.

What Is a Tuition Payment Plan?

If you're late paying tuition, you may be offered or enrolled in a tuition payment plan. These installment plans convert tuition payments into monthly installments, which can make individual payments more manageable. The Consumer Financial Protection Bureau (CFPB) reviewed tuition payment plans at 450 colleges and universities. Here are a few of their findings:

• Payment plans may have enrollment fees. In some cases, these fees were as high as $200.
• Enrollment may be automatic or easy to overlook. Plan agreements and disclosure documents that spell out fees and terms may be included with other registration documents where they go unnoticed. Students and their parents may not realize what they're signing.
• Late fees and penalty interest may apply. While many tuition payment plans are interest-free, they may have late fees that can increase the amount you owe. If you don't make your payments on time, your balance may be subject to interest, which also increases your balance.

Overall, a tuition payment plan can be helpful if you need help tackling a large balance. However, payment plans don't reduce the total amount of money you owe, and may have fees or terms that can increase your debt and make it more difficult to bring your account current. If you truly can't afford your tuition, a payment plan may not be enough.

Can Unpaid Tuition Hurt Your Credit?

With or without a tuition payment plan, unpaid tuition can hurt your credit if your account goes into collections. Your school may have its own collection department or it may sell unpaid tuition debt to a collection agency. A collection account stays on your credit report for seven years from the date of the original delinquency. Collections on your credit report will lower your credit score for as long as they're there, though the effect decreases over time.

If collections aren't resolved and the amount owed paid, your school may choose to take legal action. You'll need to hire a lawyer to defend you or run the risk of a default judgment. A civil judgment against you won't appear on your credit report or affect your credit score. However, you may be responsible for any fees associated with collecting your debt.

How to Pay Off Late Tuition

If you foresee a problem paying tuition, meet with the financial aid office as soon as possible to enlist their help. They should be able to explain any payment arrangements available to you and clarify important deadlines to help keep your account out of collections. They may also be able to point you toward emergency aid, late-deadline scholarships or campus jobs to help you get payments back on track.

Meanwhile, how do you raise money to pay your tuition now? A few ideas to consider:

• Check into a payment plan. The CFPB found that nearly 98% of colleges offer tuition payment plans to their students. Though a payment plan won't eliminate your debt, it may make paying your bill easier to manage.
• Find a job. There are many ways to make money in college, but a part-time job may be the quickest path to extra income. If necessary, you may want to reduce your class schedule or take a semester off to save extra money.
• Ask family or friends. While not always easy to do, asking your parents or close relatives or friends for a gift or a loan could tide you over at least for the time being.
• Seek out scholarships. Scholarship opportunities abound at your school and beyond. They may not come in time to help you make a late payment, but applying now could help for the next school year.
• Accept federal student loans. If you haven't taken on any student loans yet, now may be the time. With low interest rates and special protections, federal student loans are typically your best option.
• Consider a private student loan. Federal student loans require you to complete a Free Application for Federal Student Aid (FAFSA) application well in advance of the school year. If the FAFSA deadline is long past and your tuition is due now, looking into a student loan from a private lender might be worthwhile. You'll need good credit or a cosigner, but you don't have to wait for the next financial aid cycle to apply.

How to Deal With Unpaid Tuition Sent to Collections

What if your student account has already gone to collections? Many of the same principles and protections apply when any account goes into collections. Here are a few tips to consider as you go.

1. Don't ignore the collector. If you haven't answered their initial calls, call back. Calling back gives you the advantage of choosing a time when you're calm and can focus on the information at hand.
2. Find out what you owe. You may want to see an itemized bill so you can understand how charges and payments have been applied so far. Also, ask whether your debt is still owned by the school or if they've sold the debt to a third-party collections agency, so you know whom to pay.
3. Don't feel pressured. If you need time to consider your options, schedule a time to talk again. You may want to propose a repayment plan or make a lump sum payment to clear your debt. You may also want to dispute charges, for example, if you had to drop out of school temporarily because of a medical emergency.
4. Don't accept abuse. By law, collection agents may not threaten or abuse you. If you ask them in writing to stop contacting you, they must stop.
5. Get help if you need it. A nonprofit credit counseling agency may be able to help you work out a repayment plan and get your account out of collections and back on track.

The Bottom Line

If you're having issues with unpaid tuition, consider setting up free credit monitoring to keep track of your credit report and score. This is a good practice at any time, but it can be especially helpful if you're worried about an unpaid bill. You'll be notified if there's any activity in your credit file, including a tuition bill in collections or legal action on behalf of your school. You'll also feel reassured if there's no activity to report: Here, no news is definitely good news.