Very few universities allow you to pay tuition via Visa precisely because they charge so much for their service. I am suprised that your son's university allows it all, but this is why they are tacking on the additional 2.5%. I agree with mahasamatman that it also depends how much flying you do to begin with. At 0.0125, I wouldn't say that it is a great deal, but if you have to pay tuition anyway, I don't think it's a poor one, either. On the other hand, $277 can buy you 9000 miles straight up through United.

A word of caution: I paid for several of my books on my Visa last year under the same program and it took a phone call to get the miles. The name of the bookstore was not "registered" as university-affiliated. Funny enough, purchases at the University pharmacy were credited.