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WESTERN CAROLINA UNIVERSITY
MBA 625-80: Applied Business Economics, Fall 2014
Rev: December 1, 2014
ELIZABETH W. GLAS
SHAWN D. HAMILTON
DAVID L. VOLRATH
Student Account Receivables: Incentivizing Students to Pay
Brevard College is driven largely by the revenue it creates through student accounts
receiveable. Due to the small nature of the College, it is imperative that the College continues
to grow in size, by both attracting new students and retaining current students. It is equally
important that the largest subsidiary of accounts receivable, student accounts, are paid in a
timely manner to ensure that the College can continue to operate on a day-to-day basis. The
lack of sufficient incentives and follow-through by administrators encourages students to
procure large balances without commitment to pay, which creates a large risk for Brevard
College. After completing market research, we suggest that Brevard College more closely match
the standards of its peer institutions by instituting a reasonable late fee in addition to
procedures already in place, and, above all, actively following through with the student account
policies it chooses to implement. Ideally, students will be more incentivized to pay bills on time
without being burdened by additional mounting costs of a private, liberal arts education.
Introduction
Like most small private institutions Brevard College is driven by the revenue it
generates from tuition and fees from year to year. The need to maintain consistent growth
in enrollment numbers is paramount to the future success of small private institutions. This
growth is facilitated via the recruitment of new students in combination with the retention
of the current student population. The larger these two segments are the better, but these
numbers only make a difference in the viability of the institutions if the students are
bringing in revenue.

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A main problem that has arisen at Brevard College, and other small private
institutions, is the lack of payments being made on time. Under the current structure there
are not many incentives, either positive or negative, for a student to resolve their bill
immediately at the beginning of the semester. This lackadaisical approach costs the school
time and money. Most smaller institutions only have 1 or 2 people that are assigned to
manage student accounts, and it can put a great deal of strain on personnel time if they are
charged with tracking down payments several times after the semester has already begun.
Costs are also accumulated as more bills are mailed for the outstanding balance which
drives up the use of stationary and postage. Not only is the institution missing the
hundreds of thousands of dollars that it needs to operate, it is in turn spending even more
of it resources in the pursuit of collections.
With the understanding that people are rationally self-interested and will always act
according to their own set of stimuli, we have sought out to review the current processes of
Brevard College in comparison to other similar institutions to create an incentive structure
that will ensure prompt payments.
BrevardCollege’s Current Billing Policies andProcedures
At Brevard College, bills are produced on a semester basis and are mailed two
months in advance for the fall semester and one and a half months in advance for the
spring semester. Included with the paper bills are inserts outlining check-in and
confirmation procedures, financial aid FAQs, billing FAQs and policies, and payment
options. All bills are due upon receipt and include a “priority deadline” – August 1st or
December 15th. If bills are paid in full by, or satisfactory payment arrangements are made

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prior to, the priority deadline, students are guaranteed to have an expedited check-in
process that includes no waits, no wrist-slaps, and no barrier to obtaining dorm keys.
Students and their families may choose one or more of the following payment
options offered:
 Pay semester balance out-of-pocket in full prior to due date/priority deadline,
and/or
 Sign up for monthly payment plan: Pay the balance due over the course of a
monthly payment plan serviced through Tuition Management Systems, and/or
 Pursue a Parent PLUS or alternative loan for balance due.
Families may mix and match any of the above options to pay the student’s balance. On
occasion, a special circumstance may arise and, at the discretion of the Student Accounts
Manager, a student may be allowed to pay his or her balance on a different payment
schedule directly to the College.
As mentioned above, students who pay in full or make a satisfactory payment
arrangement (payment plan or loans) prior to the priority deadline will be rewarded with
expedited check-in. All other students must meet with a representative of the Business
Office to make satisfactory payment arrangements and/or to sign an internal payment
agreement. Additionally, students failing to make satisfactory payment arrangements by
the first day of class each semester may be subject to having their schedule dropped. The
Brevard College Catalog also states that students that register late, due to having a dropped
schedule, will also be responsible for an additional “Late Registration Fee” of $200.

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Although threatened, one or both rarely happens, resulting in many students procuring a
large bill without committing to pay at no disadvantage to the student.
All students with a debit balance on their account will receive a monthly statement.
Families utilizing the third-party payment plan may use the statement for reconciliation
and record-keeping. It is intended that the remaining students pay off the bill by the stated
due date (roughly 30 days out), but the bill reflects no penalties for late payment. A “hold”
is placed on accounts which have not made satisfactory payment arrangements, resulting
in the student’s inability to obtain a transcript and/or diploma (if applicable). Additionally,
Brevard College does not allow students to carry forward a balance greater than $200.
Thus, in mid-October, students with a debit balance greater than $200 will be prevented
from registering for the subsequent semester. This normally creates a small influx in bill
pay, as students are punished for failing to pay on time, and students feel pressured to
register early in order to obtain the course schedule they desire.
However, current policies at procedures at Brevard College do not properly
incentivize students to pay their bills by stated deadlines. Thus, students are able to delay
payment with little to no penalties, and it is obvious that students take advantage of the
lack of policy and follow-through. With an enrollment of 701 students for Fall 2014,
roughly 11% of students had failed to make payment in full or satisfactory payment
arrangements (i.e. the monthly payment plan) by opening day of Spring 2015 pre-
registration (October 27, 2014). Although this number dropped to roughly 4% (~30
students), Brevard College was still lacking over $100,000 in past due bills by mid-
November.

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Researching Other Schools’Policies & Procedures
In the past, the administration at Brevard College has been approached about
creating new policies to better incentivize students to pay bills on time. Such efforts have
been abandoned, however, largely due to fears surrounding the expense of a small, private,
liberal arts college before late fees and finance charges and student retention. In an effort
to better understand how bill-pay and incentives are utilized in our industry, the research
team sought to interview student accounts colleagues from schools that closely match
Brevard College’s enrollment, endowment, and general location. Not surprisingly, every
school does it differently and is currently looking for ways to improve.
We used US News and World Report to identify nine schools, spanning over seven
states, located primarily in the southeastern region of the United States that were similar in
both enrollment and endowment. We targeted schools with less than 2,300 students and
an endowment that did not exceed 50 million dollars. Setting these parameters was
important, as it allowed us to get the most accurate picture of what other schools, similar in
size and financial resources, do to incentivize their student body to make prompt
payments.
During our research we found that these schools all had some slight nuances to their
incentive structures. In Table 1, very important data points that include both positive and
negative incentives for students and families when it comes to resolving the balance of the
student’s account are seen. The “Holds” section refers to an actual hold being placed on
the student’s account. Depending on the type of hold, this can prevent a student from
registering for classes, getting transcripts or even taking exams as the end of the semester.

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We found some form of hold to be common practice although most of these still do not take
effect until at least midway or late into the semester because students do not register for
the following semester until then.
Unlike Brevard College, we found that about half of our sample population charges
late fees as incentive to pay on time, and others will tack on finance charges as well (see
Table 1). The stigma that has surrounded this approach is the perceived negative effect on
retention. However, the retention rates of those schools that do charge these fees suggests
there may actually be no correlation between decreased retention percentage and the
application of late fees and finance charges. Based on the data we collected, the retention
rates of the schools with fees is in line with those that do not have fees, indicating that this
will not have a negative effect on retention. Instead, it could have a positive effect on timely
payments from families acting in their own rational self-interest, as they do not want to pay
the extra fees – the fee is high enough to avoid if possible, but low enough that it does not
discourage leaving the school. One student accounts associate that we interviewed agreed
saying, “The students deeply affected financially by the added strain of a moderate late fee
or finance charge are the students you are not going to retain anyway.” Additionally, all
student accounts associates working for schools that do implement late fees, finance
charges, and/or other significant disadvantage (dropped schedule, ineligible for exam pass,
etc.) admitted that they liked the procedures in place, felt like the policies worked, and
anticipate that they will be used again in future semesters.

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Table 1. School Research Results
School Location
Avg.
Freshman
Retention*
Enrollment* Endowment* Holds?
Late
Fees
Finance
Charges
Other
Policies/Procedures
Brevard
College
Brevard, NC
57.8%
701 $19M
Yes; prevents
registration
if >$200
owed
No No
Priority deadline
guarantees no delay
during check-in; external
payment plan
Aquinas
College
Nashville, TN 75% 508 $8M
Yes; prevents
transcript &
grade
viewing
No No
“Unofficial” in classes
unless paid in full (may
only attend 1); very strict
with confirmation;
external payment plan
Averett
University
Danville, VA 58.8% 886 $22M
Yes; prevents
registration
$25 per
month
No
Internal payment plan for
$100/semester with no
late fees
Barton
College
Wilson, NC 67.5% 1057 $25M
Yes; prevents
registration
if >$100
owed
$25 per
month
18%
annually
May occasionally write-off
fees if student agrees to
pay; internal payment
plan for $40/semester
Blue
Mountain
College
Blue
Mountain,
MS
76.8% 520 $12M Yes
$200 late
reg. fee
No
Internal payment plan for
$100/semester; no third
party collections for old
accounts
Catawba
College
Salisbury, NC 69% 1298 $48M
Yes, no
balance may
be carried
over
No No
No move-in allowed if not
cleared; schedules subject
to dropping
Covenant
College
Lookout
Mountain, GA
83% 1104 $26M
Yes, no
balance may
be carried
over
No
14%
annually
Charge e-check and credit
card fees back to student
Mars Hill
University
Mars Hill, NC 56.8% 1426 $37M
Yes, no
registration
if over
“critical
balance”
level
No No
Monthly statements
mailed to student’s
permanent address
North
Greenville
University
Tigerville, SC 71% 2263 $16M
No; may
register, but
may not
check-in if
balance >$0
$25 per
month,
no grace
No
Internal payment plan for
free (5-month) or $50 (4-
month) + $100 charge if
not ACH; all online billing;
if balance not paid in full,
student may not take
exams (exam pass from
business office required)
West
Virginia
Wesleyan
College
Buckhannon,
WV
66.5% 1367 $37M
Yes, no
registration
if >$500
owed
$100
once per
semester
No
Internal payment plan for
$100/year, no late fees;
no “threatening” or
dropping schedules; will
escort student out of class
to make arrangements, if
no arrangements made,
will ask to leave school
(and follow-through)
*Numbers courtesy of US News & World Report, as reported in Fall 2014

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Proposal & Conclusion
As previously noted, the need to maintain consistent growth in enrollment numbers
is paramount to the future success of small private institutions. This growth is facilitated
through the recruitment of new students in combination with the retention of the current
student population. Previously, the opportunity cost of deterring well-qualified future
students and retaining current students by imposing harsh penalties for late payment of
tuition has created a hesitation to impose additional fees on students by the administration
of Brevard College. However, the data we collected suggests that a reasonable late fee or
finance charge structure has not shown to have any significant impact on retention of
student body or recruitment efforts.
Therefore, in addition to the current procedures, we suggest the implementation of
a one-time $100.00 late fee assessed to all tuition bills over seven days past the priority
deadline of the upcoming semester (August 1st or December 15th). Students who make no
commitment to pay prior to the first day of class will be subject to having their course
schedule dropped until payment in full is made up to the last day to add a course (seven
calendar days into the semester). Furthermore, we recommend a more structured
notification system to serve as a warning system to students who are at risk of accruing
late fees or having a schedule dropped. Finally, and most importantly, it is imperative that
Brevard College follows through on the policies and procedures it chooses to adopt and
publish in the Brevard College Catalog.
We strongly believe that imposing this new system will increase the percentage of
on-time payments while increasing revenue to Brevard College with the slight, albeit

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additional, income from the small number of accounts that will be assessed the late fees.
Moving forward with the proposed policy will also help prevent additional costs of time,
supplies, and postage, as student accounts associates will be able to focus less on collecting
tuition payments and more on customer service, federal regulations compliance, and
additional job responsibilities, making the entire process more efficient. Updating bill-pay
policies and procedures for Brevard College is a necessary step in order for the College to
continue to develop students and to grow as an institution.
We appreciate your sincere evaluation and consideration of this proposal and look
forward to a bright future for Brevard College as we work to improve an already successful
student accounts department.