How Smart is College Tuition Insurance?

 By Catherine Powell

Image courtesy Pixabay

As they say, education doesn't come cheap.  In fact, the average cost of a year in college in the US including room and board is $26,027.  For that amount of money, you can get a pretty nice car.  If you did, you'd no doubt insure it to protect your investment.  Believe it or not, you can do the same with higher education.  That's right, there's an insurance product called tuition reimbursement insurance that can help recover some of the funds lost should a college student be forced to withdraw from classes due to extenuating circumstances.  Below I'll reveal what you need to know in order to make an informed decision as to whether this product is right for you and your college student.

You can't get blood out of a stone.  Likewise, you'll be hard pressed to get a full refund from a college should your child find it impossible to continue his or her education due to illness, injury, or some other kind of unforeseen circumstance that makes taking classes an impossibility.  If a student loan has been acquired to pay for college expenses, your child will be responsible for satisfying the debt regardless of whether they completed their education or not.  This could put them in a financially disadvantageous situation. 

Had you opted for tuition refund insurance, all or some of these expenses would have been reimbursed provided certain conditions were met:

1. One of the conditions that qualify is chronic illness, such as what happened during the COVID-19 pandemic.  
2. Other medical conditions that qualify for reimbursement include serious injuries, medical emergencies requiring extensive recuperation, auto-immune disorders, or mental health conditions.  (Qualified conditions differ from policy to policy.  So, it would behoove you to read the fine print thoroughly before signing up for a tuition reimbursement policy.)
3. Clinical depression is covered under some policies.
4. Many of these policies cover student loans and non-extendable scholarships.
5. Depending on the policy, there may be exclusions for such things as participation in extreme sports, as well as drug or alcohol abuse.  The conditions that do and don't qualify for reimbursement, as well as how much money will be reimbursed depends on the reason for withdrawing from classes, all of which are spelled out in the policy.
6. Being expelled from college does not qualify for a refund.
7. Flunking out  or dropping out without just cause does not qualify for a refund of any kind.

Image courtesy Pixabay

What kind of reimbursement is offered with such policies?  Provided the conditions stated in the policy are met, a student or parent will be reimbursed a percentage of the tuition and fees paid for that semester, along with room and board.   The reason I say a percentage is that reimbursement policies offer to pay between 75% - 100% lost due to a mid-semester withdrawal from college.  (The percentage paid can also affect the cost of such policies.)

How much do tuition reimbursement policies cost? That depends on several variables, including the college attended, the amount of coverage provided, and the associated costs.  Premiums can range from .5%-2.5% of the cost of one academic year.  This works out to $50 to cover $10,000 worth of education at the low end to $1,000 per year to cover $40,000 at the high end.  With that in mind, anyone interested in considering tuition reimbursement insurance should look into the college's refund policy for mid-semester withdrawal. This can typically be found on college websites.  If not, a call to the bursar's office should answer any questions pertaining to this matter.  The university staff may even be able to recommend an insurance provider they have partnered with in order to assure optimal tuition coverage.

How much insurance do you need? Since the amount of money reimbursed to you is based on the sum you are out after any refund issued to you by the school, you'll want to calculate how much to insure based on several criteria:

1. Tuition
2. Room & Board
3. Non-refundable fees for food, parking, and labs.
4. Scholarships & grants that will be forfeited for early withdrawal.

Image  courtesy Pixabay

While tuition reimbursement insurance won't guarantee a student's ability to complete the classwork necessary to get a degree, it will remove some of the financial uncertainty that could derail their studies due to circumstances beyond their control.  If you have college bound children, this is one of the smartest things you should consider before you ship them off to campus.

Catherine Powell is the owner of A Plus All Florida, Insurance in Orange Park, Florida.  To find out more about saving money on all your insurance needs, check out her website at http://aplusallfloridainsuranceinc.com/