Putting Compassion Before Collections Can Be Smart Business

Saturday, May 06, 2023

Every higher education institution strives to support students with the goal of seeing them thrive in their post-grad lives. Success is seeing them use and share the knowledge they’ve gained at your school in the real world. Too often, financial and economic realities interfere in that mission. It’s time we explore the ramifications of collections and how we can give students the opportunity to overcome these hardships on their way to graduation.


The Collections Process Harms Students

When a student falls behind on their tuition payments, they’re often prevented from re-enrolling, a fact that runs counter to the fact that graduation provides their best path toward increasing their income potential and being able to pay off their debt. The collections process can also put negative marks on a student’s credit report, which is often nascent to begin with – all while adding an additional 18-40% of fees onto the debt. Dropping out puts their whole educational, employment and financial futures in jeopardy.


The Collections Process Doesn’t Help Schools

To make matters worse, the traditional collections process provides little benefit to schools. The average resolution rate of collections is only 20%. Plus, if past-due balances are preventing students from reenrolling, that institution is missing out on semesters’ worth of future tuition and fees – a large portion of which may already be secured through loans and other financial aid. Letting a small amount of debt get in the way of thousands of dollars of future revenue – not to mention a student’s brighter future – is counterproductive to your school’s best interests.  


Retention is Essential to Schools

Student retention is only going to become increasingly important to the business of higher education in the years to come. FitchRatings estimates that enrollment declines will not bounce back from the pandemic, inflation, labor shortages and other factors until at least 2025.

While some schools are increasing student services to try to attract and retain student, not all schools have that luxury. UNC Greensboro, for example, is currently facing a $12.4 million loss in tuition, fees and funding for next school year. They must make immediate budget cuts while working hard to maintain the levels of mental health services, academic advisors and other programs that are essential to student satisfaction and success.

Losing students to the collection process would only make a bad situation worse for schools like UNC Greensboro that are facing the dilemma of dealing with dwindling enrollment and a potential reduction in student services.


Creating a Better Way

If the collections process doesn’t work for students and it doesn’t work for schools, maybe it’s time to explore a better model – one that focuses on keeping students enrolled and on a path to graduation. 

At ECSI, we’re proudly not a collections agency and do not report to any of the credit reporting services. We’ve seen the benefits of taking a proactive approach to engage with students about their debt before it’s sent to collections. In fact, for every month schools wait to act on a past-due balance, there is usually a 10% decline in the likelihood of recovery.

Offering students flexible payment plans when they first get behind is essential to helping them stay enrolled. Schools that have implemented our RecoverySelect solution have seen an average of 25% increase in student retention.

At the same time, RecoverySelect boasts a 40% recovery rate – nearly double that of collection agencies. And it does it all while reducing staff workloads by at much as 75%.

ECSI is not a collection agency nor do we report to any of the credit reporting services. We believe taking the compassionate approach to collections proves to be faster and more effective. And more importantly, it’s in-line with your mission of helping students succeed in their studies and beyond.