Iker Marcaide was shocked to learn in 2008 that sending a tuition payment to MIT's Sloan School of Management via his Spanish bank account would cost more than $1,500. "The fee the bank charged to exchange currency, plus the wire fees, added more than 3 percent to a tuition bill that already topped $50,000," says Marcaide. "Plus, the money wire was lost for several weeks."
The next year, Marcaide started peerTransfer to secure lower group exchange rates for international students. Banks or wire services charge varying percentages to exchange one currency for another. For instance, a student who exchanges Canadian dollars for U.S. dollars when exchange rates are even would still pay a percentage of the exchange rate for the transaction, he says. The wire fee for transferring money is an additional cost.
If Marcaide had found a wire service with similar rates to peerTransfer when he attended MIT, he would have paid less than $750 dollars to exchange currency.
[Learn how international students can cut U.S. college costs.]
International students should follow the tips below to pay the lowest currency exchange fees possible on their tuition payments, while ensuring their payments arrive on time.
1. Only consider university-approved wire services: Students should find out which wire service their school works with by E-mailing the campus bursar or accounting office, says Iowa State University International Recruiter Timothy Tesar. They can also find this information on the university's site, notes Western Union's Vice President of University Solutions Ben Kavalec.
Universities verify the legitimacy of companies they choose to work with, according to Tesar. Given that students are sending substantial amounts of money via these wire transfers, they need to trust that the funds won't get lost or stolen, he notes. Compare the total cost of currency exchange between the wire service your university uses and your home bank, experts recommend.
[Start saving for an American education early.]
2. Wire tuition payments directly to universities: Because of the potential for accruing fees from two different banks, wire money directly from your country's bank or through a wire service to the university the student will attend, Tesar recommends.
This limits the likelihood of lost funds and eliminates the possibility of additional fees charged by a U.S. bank. Generally, schools will charge little to no fees to accept payments from banks or wire services, he says.
Often, the price is higher if students choose to wire funds from home bank accounts to a U.S. bank, peerTransfer's Marcaide adds. For example, a Canadian student exchanged Canadian dollars to U.S. dollars at a one-to-one exchange rate. The home bank added a 3 percent fee on a $10,000 transfer ($300); meanwhile, the student had set up a bank account in the United States to receive the money, which charged another $300. A student who once had $10,000 available to pay for tuition suddenly had $9,400.
[Learn about additional international student fees.]
3. Confirm exact fees and payment arrival: Whether you choose a wire service or a bank, confirm all possible charges and the exact date of arrival for the payment, says Marcaide.
Sometimes a bank will utilize an intermediary bank in the middle of the transaction that charges its own additional wiring fee. If students are unaware of this charge, they won't wire enough money to cover tuition—and the result could be an enrollment block by the school, he cautions. A late payment could lead to the same problem.
"We ensure that the amount that the student is expecting the school to receive is received, taking care of all potential fees that could happen in the process," Marcaide notes of peerTransfer's service. It's important that any bank or wire service that students choose do the same, he recommends.
Reyna Gobel, frequently quoted as an expert on student loans and college costs, is the author of "Graduation Debt: How To Manage Student Loans And Live Your Life" and "How Smart Students Pay for School: The Best Way to Save for College, Get the Right Loans, and Repay Debt." She has appeared on PBS's Nightly Business Report and speaks regularly at CollegeWeekLive.