What is 'Tuition Insurance'
Tuition insurance provides a safety net should a student take an unexpected pause from school. A policy, which can cost several hundred dollars per year, guarantees a refund for tuition, on-campus housing and fees if a student withdraws early.
BREAKING DOWN 'Tuition Insurance'
Before obtaining tuition 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.
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, the 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%.
In many occasions, colleges have policies addressing when a student quits in the middle of a semester. For example, according to Consumer Reports, Boston University will pay back 40% to 100% percent of tuition back depending on how far into the semester a student withdraws.