The flow of money into higher education has never been more complex. As families draw on a broader mix of funding sources—529 plans, employer programs, private scholarships, foundations, government payers, and other third parties—universities are now managing unprecedented volumes of incoming payments from outside their own systems.
This surge represents real progress: better access for students and more diversity in how education is financed. But it also exposes institutions to operational risk, fraud vulnerability, and scalability challenges that few business offices were built to handle.
The institutions that navigate this shift the best won’t just stay compliant; they’ll create a better, faster, more transparent student experience by unlocking growth over the medium term.
Setting the Scene
Higher education is facing pressure from both sides. Tuition keeps rising, while student affordability is being squeezed by inflation, cost of living, and tighter federal loan limits.
As costs climb, families are piecing together more funding sources than ever, by moving beyond traditional loans and grants to 529 plans, specialized savings accounts, private scholarships, and other third-party payers. The average student now relies on multiple external sources to bridge the gap.
That’s good news for access and affordability, especially under new federal loan-cap restrictions like the “One Big Beautiful Bill” (OBBB). But it also creates new operational and risk challenges for university business offices. A key question remains: How can institutions harness this growth in external-payer volume without being overwhelmed by fraud, manual processing, and scalability risks?
This article explores those risks and offers practical strategies to turn them into long-term institutional advantages.
"How can institutions harness this growth in external-payer volume without being overwhelmed by fraud, manual processing, and scalability risks?"
Risks of Rising External Payment Volume
1. Increased Check Volume and Fraud Exposure
A disproportionately large number of external-payer organizations still rely heavily on paper-based payments when remitting funds. This poses a real risk to universities and their business offices as the payment-fraud landscape continues to shift. For example, an Association for Financial Professionals (AFP) survey found that 80% of organizations experienced attempted or actual payments fraud in 2023, up from 65% in 2022. Paper check fraud accounts for over $24 billion in payment losses annually, and “check fraud remains the most prevalent form of payments fraud” (2024 AFP Payments Fraud and Control Survey Report).
For a university business office processing tens of millions in payment volume from tens of thousands of external sources, each check carries risk: lost or stolen payments, forged endorsements, duplicate deposit attempts, envelope theft, and mail-fraud schemes. These are not theoretical. Fraud actors still target checks despite the growth of digital payments (and, actually it’s increasingly the easier way to target them).
2. Manual Processing and Entry-Error Risk
I often say that the money-moving part of payments is the easy part. The real challenge lies in information sharing that accompanies the money. My favorite shorthand is Payments are People. When those people—scholarship providers, 529 administrators, and employers—use non-standardized methods to send the information layer of a payment (student name, ID, term, etc.), your business office ends up doing the hard work of deciphering, matching, and reconciling every transaction by hand.
Unlike standardized tuition billing, external-payer flows arrive in every imaginable format, timing, and level of completeness. Some include PDFs, while others are handwritten notes or incomplete student identifiers. The result is a patchwork process that drives up error rates such as misapplied payments, mis-coded funds, Family Educational Rights and Privacy Act (FERPA) risks from mishandled documents, and persistent reconciliation delays.
3. Non-Scalability and Resource Pressure
Most business offices don’t have the slack for this. Staffing is tight, systems are aging, and expectations for speed and transparency keep rising. Without modernization, growing external-payer volume quickly becomes a scalability risk.
Without automation, this complexity erodes process quality, timeliness, and, ultimately, the student experience.
Turning Risks into Opportunities
The reality is that most payment tools and banking partners serving higher ed weren’t built for today’s surge in external-payer volume or the complexity it brings.
Managing this shift requires rethinking how to connect traditional banking infrastructure with modern software layers that bridge payers and universities. It’s not as simple as “just automate.” Instead, we need bold approaches that push beyond what exists in higher ed today.
Adopt “Smart” Banking Platforms
If we are honest, many of the issues with processing payments from external payers stem from our spreadsheets not talking to our bank account, which does not talk to our student information system. Financial Technology (”fintech”) has exploded over the last decade by marrying financial services with automated workflows and integrations into these backend systems. You’ve seen platforms like Brex1 and Mercury2 revolutionize business banking.
This trend, however, has not yet occurred in higher education, particularly with respect to external payers. I really believe in the power of smarter banking platforms, though I also recognize that this requires a shift in thinking. Opening new bank accounts for universities has been somewhat taboo, but this is only a function of the “it’s always been like that” argument. S&P 500 companies are managing their treasury using crypto companies. It’s time for higher ed to embrace the technological advantages that innovative banking platforms can offer.
Normalize Non-Logged In Experiences
Here is a statement that I hear from both universities and external payers all the time:
"I would rather sub in as an offensive lineman on Saturday afternoon than create yet another login to another platform."
A bit dramatic (and perhaps exaggerated) but fair. One of the biggest blockers to smoother payment connections is the obsession with forcing users to create new accounts.
With tens of thousands of external payers sending funds to 5,000 institutions—roughly 50 million potential payment corridors—no single platform will ever capture them all.
The future has to be decentralized. If you look at other industries and cutting-edge technologies, mass adoption occurs when barriers to entry and friction of use are extremely low. I know that the next question will be: So, how do we safeguard against bad actors? The great thing about where fintech is now is that we have tools to validate payments and accounts without requiring username and password authentication (which, these days, isn’t overly secure anyway).
Coordinate External Payment Processing
Don’t worry, I am very aware that “centralize” is a dirty word. That’s why I really only call for coordination of payments. I have spoken to so many universities that have very disjointed processes between Financial Aid, Procurement, and the Bursar Office, which always result in processing delays (and, too often, because a check is sitting somewhere it shouldn’t be).
Empower your bursar and business office with the proper tooling, and I guarantee they will be excited about the prospect of having external payments coordinated through the office. It provides a single source of truth, which is great for both your staff and the student-family experience. One big caveat exists: Do not do this without proper investment. Dropping more manual workload in a single place will not create any efficiencies.
Closing Thoughts
When managed well, external payer growth can become a strategic differentiator:
Faster, more transparent posting means happier students and families (and payers)
Reduced fraud and reconciliation costs mean cleaner audits and less financial loss
Modern processes are attractive to digital-native staff recruits (the next generation)
But ignoring it comes with consequences: higher losses, slower service, and staff burnout.
The bottom line is that external payers aren’t going away; in fact, they’re multiplying! Universities can either let complexity grow unchecked or unlock the value currently trapped in paper checks. “Treat the payments function like a brand experience,” one CFO told me recently. “If families see us as efficient, trustworthy, and easy to work with, that’s part of why they enroll.” Modernizing external-payer handling isn’t just good risk management. It’s good for students, it’s good for universities, and it’s good for higher education.
"Modernizing external-payer handling isn’t just good risk management. It’s good for students, it’s good for universities, and it’s good for higher education."
https://www.brex.com/
https://mercury.com/