The soaring cost of a college education entails a range of financial risks, including falling into debt to take on student loans. Yet families may underestimate another type of risk — that a student may unexpectedly have to leave school mid-semester due to unforeseen circumstances, leaving them at a loss for tuition paid — and without credits for the semester.
That’s where tuition insurance can come in handy, ensuring that students and parents don’t lose the potentially substantial sums of money they pour into college costs.
Here’s what to know about tuition insurance.
What is college tuition insurance?
Tuition insurance, also called tuition refund insurance, offers reimbursement for lost college costs, such as tuition and qualifying expenses, in the event that an emergency situation forces a student to withdraw from their academic program before the end of a semester, or academic term.
Tuition insurance policies have become increasingly popular since the coronavirus pandemic as more students are wary of the potential of being diagnosed with chronic illness or mental health issues, and as housing costs at colleges rise, Robert Farrington, founder of the personal-finance blog The College Investor, told CBS MoneyWatch.
Tuition costs at public universities increased 9.24% from 2010 to 2022, and tuition at private universities rose even higher still, data from the Education Data Institute shows.
What is — and isn’t — covered? And when?
Tuition insurance can offer coverage for academic withdrawals due to COVID-19; chronic illnesses, such as auto-immune disorders; serious injuries; mental health conditions, such as Guard.and other emergencies, according to tuition insurance company Grad
However, which emergencies are covered may vary based on your insurer and coverage type, so it’s important to read the fine print before settling on a particular insurance provider and plan. For instance, emergencies arising from a pre-existing medical condition, a student’s drug usage or her participation in extreme sports are typically not covered under tuition insurance policies, according to insurance company Liberty Mutual. Flunking out also isn’t covered.
As for what costs are covered, college tuition insurance typically covers room and board, in addition to tuition and fees, according to Farrington. It doesn’t cover books and supplies, however.
To understand what is and isn’t included in a tuition insurance plan’s coverage, “read the fine print,” Shannon Vasconcelos, a college finance consultant at educational company, told CBS MoneyWatch.
How much money will I get back?
Tuition insurance reimburses students for anywhere between 75% to 100% of the money they lose by withdrawing from their college program mid-semester, according to Consumer Reports, a nonprofit consumer organization. Exactly how much money an insurer offers in reimbursement depends on the reason for the student’s withdrawal and the type of insurance policy purchased, according to the National Association of Insurance Commissioners.
How much does tuition insurance cost?
The cost of tuition insurance can vary widely, depending on the academic institution attended and the type of coverage selected. Typically, that expense ranges between 0.5% to 2.5% of the annual total cost of one academic year, Vasconcelos told CBS MoneyWatch.
“On the low end, 0.5% of a $5,000 tuition charge is $25 and may feel very affordable to a family, whereas 2.5% of
$40,000 tuition, or $1,000, may feel less [affordable],” Vasconcelos said.
Is tuition insurance worth the cost?
Many students will never use their college tuition insurance, but it can be useful for mid-semester withdrawals, “when refunds are minimal but coursework is still plentiful,” Vasconcelos said.
She advises students and their families to consider how stingy or generous their college’s tuition refund policy is before purchasing an insurance policy.
Parents should also consider that many common reasons for academic withdrawals are not medical, but are “social, emotional, academic, disciplinary, or financial” — none of which are typically covered by a tuition insurance policy, according to Vasconcelos.
How do I get coverage?
Check the webpage of your university’s bursar’s office to see if the institution has partnered with an insurance company to provide its students with optional tuition insurance coverage. Buying insurance through your institution during the tuition payment process can make it easier to buy coverage that extends or strengthens the college’s existing tuition refund policy.
If your institution doesn’t offer coverage, you can still purchase an insurance policy on your own by going directly to the insurance provider’s website.
Students and their families can buy tuition insurance up until the first day of classes.
Tuition insurance is generally offered on a semester-by-semester basis, so you’ll have to renew your coverage before the start of each academic term. You may also be able to purchase insurance annually, but you generally won’t get any discounts for doing so, Vasconcelos said.