26% interest on overdue tuition?

Planning on paying your tuition late? Or paying it off in installments? It’ll cost you. Some Canadian universities charge a higher rate of interest on late payments than do the usual targets of cries of usury, namely credit cards.

We were surprised to discover this, because while lowering tuition has long been a central objective of student activists, and hidden ancillary fees have always been on their radar screen, the subject of interest — which only hits the most vulnerable students, those unable to pay their university costs up front — has never generated much, well, interest.

Maclean’s OnCampus selected 27 universities, of varying sizes from across the country, to get an idea of how students are being charged if they are late paying their tuition and fees. We also asked whether the student was required to pay all fees for the academic year up front in September or if they could pay at the beginning of each term. Finally, we looked at whether the university made special arrangements for student loans, which are dispersed in two installments (fall and winter).

For the purposes of our survey, we have listed the annualized interest rate charged in order to easily compare. Some schools charge the fee monthly but do not compound the interest; that means that late payers are not charged interest on the previous month’s interest. Among the non-compounders are the University of Calgary and Simon Fraser University. Also, most schools do not officially refer to the charge as “interest,” but rather describe it as a “late fee” or “penalty.” For this article we call any late charge calculated as a percentage of the amount owing “interest.”

The survey shows that there is no national standard for interest charged on outstanding tuition. While most universities charged interest, five schools surveyed charged a flat late fee no matter the amount outstanding. Among those schools charging interest, rates varied from a high of 26.82 to a low of 6.75 per cent. Some universities charge a flat late fee in addition to interest charges. By way of comparison, standard credit cards generally carry and interest rates of 18 or 19 per cent, with low-rate options offered at 10 per cent or less.

The highest annualized interest rate was 26.82 per cent (two per cent per month) at the University of Northern British Columbia. Rob van Adrichem, director of media and public relations, said that UNBC’s director of finance Leanne Murphy was surprised to hear that their interest rate was higher than at other schools. “We set our rate when we opened in the early nineties,” van Adrichem said. “And that was pretty standard.” SFU also charges two per cent per month and lists its per annum rate at 24 per cent.

According to van Adrichem, UNBC does not have a significant problem collecting outstanding fees from its 4,200 students. He says that the nature of the school, with a large portion of its students studying off-campus, pushed UNBC to offer many services online, including payment by credit card. At the end of March, UNBC had $200,000 outstanding from winter fees.

Right behind UNBC and SFU, seven universities charged a 19.6 per cent annualized rate: Saskatchewan, Victoria, Regina, Ryerson, Toronto, Windsor, and Mount Allison.

At the other end of the spectrum, Memorial University in Newfoundland charges only 6.75 per cent on fees still outstanding at the end of the academic term. Memorial also caps late charges at $75 per term and the fee is not charged to student loan borrowers.

Although UNBC and SFU appear to charge the highest late fee, many universities charge both interest and a flat rate late fee. For instance, Mount A, Acadia, and Dalhousie charge a $50 late fee in addition to interest. Concordia, Ottawa, New Brunswick, Prince Edward Island, McMaster, and McGill also charge a flat late fee in addition to interest.

Some universities don’t appear to charge any interest — instead only a flat late fee. Winnipeg, Manitoba, Lakehead, Waterloo, and Western charge between $50 and $130 to students with unpaid fees.

The fact that UNBC and SFU collect tuition in both the fall and winter term may reduce the likelihood that students will incur late fees. At most universities in Ontario, in contrast, students are required to pay tuition for the entire academic year up front in the fall, even though student loans are paid in two, semi-annual installments. Some universities, such as McMaster, charge a fee to student loan borrowers to defer their winter tuition payment until the second student loan installment.

Most schools do have some kind of service for students who find themselves unable to pay, such as emergency bursaries. It seems that most schools will be flexible and find an arrangement with students who provide information to their financial services departments about their financial situation.

For example, the University of Calgary only charges interest to students who haven’t consulted with university staff. Students with student loans can easily defer their tuition payment until they have received their funds. U of C’s website also clearly states that students will not be dropped from their classes for non-payment.

However, some schools, such as UNBC, reserve the right to deregister students from class for nonpayment. Universities will sometimes even resort to using collection agencies to collect unpaid fees. But in most cases these measures are reserved for students who do not communicate their financial situation to the university.

-with a report from Joey Coleman