While today’s digital-first students navigate campus life through smartphones, many colleges and universities still rely on fragmented, analog payment systems. These systems introduce inefficiencies that disrupt cash flow and undermine student satisfaction — factors critical to the long-term success of any higher education institution. Unified digital commerce systems are the next-generation alternative, offering not only streamlined financial processes but also the modern payment experiences students expect. By facilitating greater efficiency and smoother payments, they score a dual victory for an institution’s financial health and student success.
The Hidden Price of Legacy Payment Systems in Higher Education
Siloed, legacy payment systems in higher education absorb valuable resources and cloud financial visibility.
America’s colleges and universities face a resource crisis rooted in outdated payment systems.
Delinquent tuition payments have become a persistent financial challenge for higher education institutions in the United States. At the end of 2023, 72% of U.S. colleges and universities faced outstanding accounts receivable (AR) exceeding $1 million. One-third had overdue balances in excess of $5 million. Only 1% reported past-due tuition and fees of less than $100,000.
One of the key sources of this problem is the continued use of inefficient, legacy AR systems. Nearly three-quarters (74%) of higher ed officials dedicate up to half their time to recovering delinquent tuition, with 42% assigning 10 or more staff to these efforts. This resource-intensive approach, which relies heavily on manual outreach methods such as phone calls and emails, diverts personnel from the core mission of delivering quality education and student services. Moreover, such a system is all too apt to let at-risk accounts fall through the cracks.
Siloed payment systems challenge collection efforts.
The reason for this is that the lack of a unified source of student financial data poses one of the largest barriers to collections. The fragmented nature of older payment systems means that there is no centralized repository of accurate data about which students have past-due accounts, how much they owe and where they are in the outreach process. This lack of visibility into students’ financial standing constrains strategic planning, delaying critical decisions on student outreach for payment collection. Modernizing and unifying these AR processes can free up scarce human capital while also safeguarding cash flow.
Updating and automating payment systems is helping universities recover vital resources.
Standardizing recovery and outreach processes is essential to improving collections. Automated solutions can mitigate financial risk and ultimately stabilize finances by fully integrating into an institution’s student information system to track and settle accounts. St. Edward’s University, for example, recouped 47% of outstanding tuition balances — some $520,000 — after modernizing its AR system.
How Modern Payment Systems Satisfy Gen Z
Next-generation payment systems not only improve cash flow but also cater to the expectations of Gen Z students for convenient digital payment experiences.
Next-gen payments can close the gap between higher ed needs and Gen Z expectations.
Legacy payment systems create problems for students and institutions alike. A Transact study found that 71% of U.S. college students would be more likely to pay their tuition promptly if offered next-gen digital payment options. This willingness reflects broader trends identified by a PYMNTS Intelligence study, which confirms that Gen Z strongly favors convenient, mobile financial experiences. Furthermore, 68% of students in the Transact survey indicated that mobile-first payment options would reduce stress and improve their ability to manage finances.
Outdated payment systems cause avoidable stress for digital-native students.
In confirmation of this finding, a global study of undergraduates in key markets — including Australia, Spain, the United Kingdom and the U.S. — revealed a disconnect between payment experiences at higher ed institutions and Gen Z student expectations. Three in four undergraduates reported experiencing stress due to fragmented college payment experiences. The primary stressors were ambiguous payment processes (25%), lack of convenient payment options (21%) and too many payment choices (14%).
In contrast, unified digital commerce systems offer seamless, user-friendly payment experiences across all aspects of campus life. By matching student payment preferences, colleges and universities can inspire greater trust, reduce payment-related friction and ultimately move closer toward balanced AR books.
Student payment experiences might just become a new metric for college rankings.
There is another reason why understanding student payment preferences is highly relevant to higher education institutions. Nearly three-quarters (72%) of students also said the payment experience should be a key metric for ranking colleges and universities. The strong link between payment experience and student satisfaction suggests that payments will increasingly shape students’ perceptions of an institution’s reputation. By implementing a unified payment ecosystem, schools could boost their standing in student experience rankings.
