When it comes to student financing, there are a lot of options available to schools and their students. One of the most common options is a loan with a compound interest rate, which accumulates over time and can result in significant debt in the future. However, we at Gratify think there is a better way – a flat transaction rate that can be shared between the school and the student or carried by the student. Its up to you. This rate, which is a fixed amount and smoothed over all instalments and settlements doesn’t accumulate over time, can be a much better option for students and schools in the long run.
What is a Flat Rate versus a Compounding Rate?
A flat rate is a fixed rate applied to the tuition. So a $10,000 tuition with a flat rate 10% makes the course $11,000. A compounding rate adds interest to the balance each month, increasing the total cost to the student. In our 2 year example, the total cost of this $10,000 tuition becomes $12,203. For schools, that cost difference goes to the financing house meaning there’s no monetary benefit to the school.
|Term||2 years||2 years|
|Total Tuition Cost||$11,000||$12,203|
Flat Transaction Rates are More Transparent: A flat transaction rate is a fixed cost, which means that it’s much easier for students and schools to understand. They can see exactly how much they’re paying and can factor that cost into their budget. With a compound interest rate, schools and students are often unaware of how much they’ll owe in the future, which can lead to financial stress and anxiety.
Flat Transaction Rates are More Affordable: A flat transaction rate, smoothed over every instalment, is often more affordable in the long run than a loan with a compound interest rate. With compound interest, the interest can accumulate over time and can make the loan much more expensive than expected. A flat transaction rate, on the other hand, is a static cost that doesn’t change – no matter how much time passes. This makes it easier for students to budget and plan for the future.
Flat Transaction Rates Encourage Responsibility: When students take out loans with a compound interest rate, it’s easy to ignore the future consequences of their borrowing. After all, the costs won’t be felt until later. With a flat transaction fee rate however, students can think about the cost of borrowing upfront, which can encourage more responsible borrowing habits.
Flat Transaction Rates Grow Enrolments: Finally, schools are starting to realize that flat transaction rates are better for their enrolment numbers. A flat transaction rate makes tuition more affordable than a compounding tuition, and so it boosts enrolments.
A flat transaction rate is the better option for student finance. It’s transparent, affordable, encourages responsibility, and is better for schools. For schools looking to offer financing options to their students, a flat transaction rate should be at the top of their list. Students will appreciate the simplicity and affordability of the tuition, and schools will appreciate the financial security that comes with it.
Give Gratify a call today and offer more affordable financing to your students!