What Is Tuition Insurance?
Tuition insurance provides a financial safety net should a college student take an unexpected pause from school. A tuition insurance policy, which can cost several hundred dollars per year in premium, guarantees a refund for tuition, and on-campus housing and fees if a student withdraws early.
- Tuition Insurance provides reimbursement when a college student is unable to complete an academic term due to an unforeseen, covered accident, injury or other covered reason.
- Covered financial costs may include eligible funds paid from savings, student loans, college savings plans, or other means for tuition, room and board, and other fees.
- These policies do come with a price tag of hundreds to thousands of dollar per year in premiums, depending on the comprehensiveness of coverage and the college's sticker price.
How Tuition Insurance Works
In 2020-2021, the average cost of tuition, fees, room and board, books, and other expenses for full-time undergraduate students ranged from $18,550 to almost $55,000 a year. Most institutions do not offer a 100% refund for students who fail to complete a term. This insurance product is perfectly justified for the many parents who go the extra mile to fund their kids' college tuition with a low confidence level that their kids will complete the courses and graduate.
Before obtaining tuition refund insurance, families must remember that certain schools will reimburse part or all of a student's tuition if they withdraw by a certain date. Therefore, it is imperative that families of students look at the conditions required for filing a reimbursement claim and weigh the likelihood of meeting those conditions.
For example, if a student has a history of poor health, tuition insurance might be something to consider, because the student might have to drop out of school due to serious illness. However, if this is not the case, the family might need to explore other college saving options besides tuition insurance.
Approximately half of prospective college students worry that they’ll never graduate, according to a 2017 survey conducted by Allianz Partners.
Some provide refunds only if the termination is due to a major health condition, physical or mental, requiring documentation of costs and a doctor’s recommendation to quit school—not just for poor grades or a change of mind. Since most students are young and healthy, insurance may not be necessary. Policies also differ with respect to the percentage of refund: One company may pay back 100%, while others might charge a lower premium and refund 75%.
On many occasions, colleges have policies addressing when a student quits in the middle of a semester. For example, Boston University will pay back 20% to 100% of tuition depending on how far into the semester a student withdraws.
Due to increased uncertainty around the status of enrollments and college attendance in the upcoming semesters due to the global COVID–19 pandemic, some tuition insurance providers are limiting their coverage for that illness. Check with your insurance provider to see what exceptions or limitations the pandemic may impose.