How treating 529 like Third-Party payments transforms the student (and Bursar) experience
A case study on how SEU took best practices from third-party payments and applied them to 529. Plus the Pell Grant faces a $2.7BN budget shortfall, Mastercard unveils something new.
As promised, I will endeavor to keep everyone on their toes each week and throw in a real life, applicable, and relevant case study from a University that has used fintech to improve payment experiences, both for their student families and themselves. The latter is important, and often overlooked, because the more streamlined and efficient payment operations are, the more time Business Office and Financial Aid professionals have to spend with their students - the reason so many of you got into this profession in the first place (unless you got into it because you loved manual paperwork, in which case I guess I am not of much help!).
This week I go into how St. Edward’s University (SEU) in Austin, TX took a new approach to 529, borrowing from their processes for other payment verticals. It’s a think outside-the-box moment, and has been extremely fun working with them on. I will break down what the change is, what was needed to facilitate it, and how it has transformed the payment experience.
First, what’s newsworthy this week?
The Pell Grant is facing a $2.7 Billion (yes, with a B) budget shortfall. This is not only bad news generally for students, it also means the gap needs to be filled with more private tuition funding, which potentially means an influx of admin work for Business Offices. Read more here.
Mastercard unveiled its new “One Credential”solution. This shifts them toward being more of a PayPal type wallet than a pure card company - they are trying to own the consumers entire financial lives. This one is interesting, but Mastercard are notorious for using Press Releases to gauge demand; my guess is that this is 0% built. Interesting nonetheless. Read more here.
JeelPay raised USD6.6m to build and scale its “Study Now, Pay Later” product in Saudi Arabia. While a very different country and education landscape, it is always interesting to see how payment methods overseas are developing. Read more here.
Case Study: SEU 529 Payments
In the good ol’ days, payments from student families were ‘simple’. The three C’s dominated - cash, card and check. Alas, 529 has now entered the chat, complicating the processes for student families to get their hard saved funds to Universities (I wrote about why we are seeing an acceleration of 529 payments in my first Bursar Bulletin).
What needed fixing?
The framework I like to use most as a starting point for what a customer wants, and how the experience should be developed, is the “Job to be Done” framework. If you apply this to paying tuition, particularly for a parent, you realize that the job to be done for parents is not simply paying an outstanding balance.
Rather, it is securing their child’s education and future, a job that creates high anxiety for any parent when delays and deadlines come into play. Paying with a bank account (ACH) or credit card results in an instant update of the student account - meaning parents are instantly absolved of the anxiety of securing their student’s education.
529, on the other hand, embeds new complexity, manual work, delay and ambiguity into the payment process - meaning it creates more anxiety. This forced us to rethink the payment process when a student family was using a 529. There had to be a better way that dramatically improved the experience for students and their families.
What did SEU do?
The way Business Offices can think about it is that parents end up doing a similar amount of administrative work to facilitate a payment from a 529 as a Business Office does when working with a sponsor making a third-party payment. The difference is that with a third-party payment, Universities are notified and then (in most cases) apply a credit to the student account ahead of payment - in some cases weeks or even months ahead of payment. This reduces the anxiety level as students are able to see that the balance has been applied and can be more certain about the amount they owe.
When you think about it, 529 is very similar to the third-party process. SEU took this thinking and turned it into a reality. After verifying that a student family was paying with 529, SEU now puts that student account “on contract” for the payment amount that is expected from the 529. This creates a sense of immediacy and security for student families that was previously not possible.
What you very quickly realize is that payments are about people. Solving that people aspect is the key to unlocking better payment operations.
What needed to exist for this to work?
This all sounds good in theory, but the practical application of treating 529 payments in a similar fashion to third-party payments meant that there needed to be a significant new capabilities introduced into the process:
SEU needed a way to know that a student family was paying with 529
SEU had to validate that the 529 payment was legitimate (you don’t want anyone being able to just say they are paying with a 529 to gain more time)
SEU needed a way to communicate with the student family that the balance had been put “on contract”, meaning the balance is applied immediately
SEU then needed a way to facilitate payment from the 529 online (and provide transparency into where the payment was - the payment tracker)
The wrap up…
Backpack’s vertical payment platform gave SEU the tools to implement just this. SEU’s student families had a way to both notify the SEU Business Office that they were paying with a 529, and immediately have their payment amount applied to the student account - meaning that student’s were able to register for classes, avoid class drops, reduce late fees and generally improve the payment experience dramatically. Backpack took the 529 validation piece, ensuring that a 529 account existed and the money was on its way.
It’s funny, we have heard of so many Universities that treat Prepaid Tuition Plans as third-party payments, but have had the direct-sold 529 payments sneak up on them. It is time to rethink how these payments are handled so that we can relieve the burden from student families, and create better outcomes for students.
We would like to thank Peter Beilharz, Kelsey McClure, and the entire St. Edward’s University Student Accounts team! SEU hosted members of the Backpack team this week. Together, we worked to find more ways to supercharge their payment operations and give them more time to focus on their students.
Poll time!
We will release results in the next newsletter. I would love for this to become a regular thing so that we can all learn from one another on a week to week basis! If you have any poll questions that you’d love to get feedback from hundreds of fellow Bursars, please send them in or comment on the post.