Do You Need a Financial Responsibility Agreement?

Signing Agreement shutterstock_688690210.jpgMore than 60 percent of higher education institutions now require students to sign financial responsibility agreements, according to an April 2017 survey from the National Association of College and University Business Officers (NACUBO). Of those, more than half require students to sign these agreements once per term, the survey shows.

In most cases, students’ responsibilities to pay the costs of their education have not changed, but these agreements are intended to make sure students understand those responsibilities. In general, the agreements define the cost of a student’s education and outline financial policies associated with enrollment, including the university’s expectations for payment

 

Leaving a Paper Trail 

Will signing an agreement in order to register for classes really ensure that students will pay their tuition bills? Not necessarily, but seeing all their financial responsibilities outlined in writing may increase some students’ awareness.

But more than compelling students to pay what they owe, a financial responsibility agreement is helpful for chasing down payments when students don’t pay up. When an institution must turn to collecting student debts, a paper trail can be very important. “Schools need to have clear records of debts and associated collection fee practices, especially if they intend to assign debts to collectors,” says Bryan Dickson, senior policy analyst at NACUBO. “Recent court rulings have made it even more necessary to have strong agreements.”

For example, in 2014, Bradley versus Franklin Collection Service held that a contract must to contain specific language regarding collection fees. In that case, simply stating that a party agrees to pay “all costs of collection” and then charging a percentage fee was found to be in violation of the Fair Debt Collection Practices Act, Dickson says. Financial responsibility agreements allow colleges and universities to spell out in writing exactly what fees will be charged in case of delinquent payments.

Crafting an Effective Agreement

Because so many institutions are incorporating financial responsibility agreements,

NACUBO developed guidelines and model language for such agreements. The information was published in an advisory report issued in 2015. “Since then, we have received lots of positive feedback,” Dickson says. “Members are sharing the advisory report and citing it in their own presentations, so the word is clearly out and folks are definitely utilizing the model language.”

Based on NACUBO’s guidelines, every financial responsibility agreement should include these four priority topics:

  1. A promise to pay. The agreement should outline the fees and expenses that will be charged to the student and clearly explain that the student is legally responsible to pay.
  2. A description of delinquent accounts and collections. Every agreement should explain the steps that will be taken when an account becomes delinquent and how the institution will attempt to collect past due accounts.
  3. Make sure the agreement discusses how the school will contact the student about any past due accounts and whether family members or other individuals may be contacted.
  4. Legal language. The document should explain that the current agreement will override any previous agreement, as well as any other language that the institution deems important and appropriate. Always check with legal counsel to make sure the institutional agreement is in compliance with state laws and regulations.

If your college or university doesn’t have a financial responsibility agreement in place, it may be time to institute one.  Students will have access to more information about their financial responsibilities as well as how unpaid bills will be handled.

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