Starting the 2014-15 school year, Stanford will offer two new financial options for families: the Installment Payment Plan (IPP) and Student Loan Consolidation and Refinancing (SoFi).
Approved by the Board of Trustees on June 11, the new additions to the financial system aim to help struggling families with payments. While SoFi allows for low-interest loans, the IPP allows families to pay a monthly tuition rate rather than signing a large check at the start of each quarter.
The Installment Payment Plan
According to Karen Cooper, director of financial aid, a survey taken by Stanford students during the 2013-14 school year examined how families currently pay tuition, as well as their level of satisfaction with the support they receive. Results showed that people not receiving scholarships or financial aid funds often struggle to pay the $20,000 quarterly fee.
“We’re very proud of our financial aid program, and if people are having a really tough time paying the bills, I encourage them to talk to the financial aid office, complete a financial aid application, explain their individual circumstances to us and allow the staff to work with them to see what the best options for them are,” Cooper said.
The IPP uses new technology that allows for a more flexible program setup, as opposed to a similar payment plan that had been previously attempted. The school will email reminders about payment dates to families and will expect students to review their Stanford accounts every month.
“The Installment Payment Plan does require more staff to administer, but this is justified by the benefit to the student and their family,” said TJ Fletcher, director of Student Financial Services. “We expect families to view and manage their payments via Stanford ePay, as usual.”
The SoFi loan program
The SoFi loan program adds a lower interest option for parents than does the federal loans program. Parents using federal loans can defer payments while the student is enrolled in school in order to spread out payments over time. SoFi, on the other hand, does not allow borrowers to defer payments but instead offers interest rates as low as 2.65 percent as compared to the federal loans’ interest rate of 4.288 percent, said Cooper.
According to SoFi co-founder and CEO Mike Cagney M.S. ’11, the company encourages potential borrowers to review the amount they plan to take out in loans. By checking in advance, customers can ensure that they will be able to pay back the money on time to avoid difficult payments in the future.
“[Make] sure that the amount you’re borrowing is in line with your ability to pay it back when you come out [of college],” Cagney said. “That level of financial understanding is one of the most important exercises that everyone should go through when coming into school.”
SoFi also offers benefits other than low-interest loan rates, including career support and unemployment protection. However, its credit approval is more stringent than the federal loan program’s so not everyone who applies will necessarily meet the company’s criteria.
Among those not covered by SoFi are non-U.S. citizens, mainly due to the difficulty in estimating the financial stance of international students. Though SoFi currently will not grant loans to international students, Cagney spoke about potential options in the future.
“The biggest challenge we have with international students is that … unless you can demonstrate you have financial capability, you’re not going to be able to make it over [to the college],” Cagney said. “[An international program is] on the drawing board for us, and we’d like to do it, but I think we’re probably a year away.”
According to Cooper, the University does not have many financial aid opportunities for international students since it aims to inform them of the financial realities of schooling at Stanford prior to students’ decision to attend. Though SoFi may not be an option for non-U.S. citizens, international students can still use the IPP for budgeting.
SoFi is also currently working with the Stanford Alumni Association to refinance graduates and has begun to offer mortgages and personal loans as well. Cagney said that Stanford alumni make up a large portion of SoFi’s investors.
Spreading the word
To alert the Stanford community about the additions to the financial program, the University plans to increase the amount of information about SoFi and the IPP available on its website. The Student Financial Services site already covers the IPP in depth.
Although their services are available to all students, the financial offices have concentrated on notifying the incoming freshmen class and informed them of the financial options via mail.
“We’re pleased to offer this new payment plan because it gives students and parents an additional option that they may find useful,”Fletcher said.
Originally published on the Stanford Daily.