Tuition Insurance

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, on-campus housing, and fees if a student withdraws early.

Key Takeaways

• Tuition Insurance provides reimbursement when a college student is unable to complete an academic term due to an unforeseen, covered accident, injury, or other reason.
• Covered costs may include eligible funds paid for tuition, room and board, and fees.
• These policies come with a price tag of hundreds to thousands of dollars per year, depending on 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 justified for parents who fund their kids’ college tuition with low confidence in their completion of courses and graduation.

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 specific date. Therefore, families of students should review the conditions for filing a reimbursement claim and consider the likelihood of meeting those conditions.

For example, if a student has a history of poor health, tuition insurance might be something to consider, as they may need 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.

50%

Approximately half of prospective college students worry that they’ll never graduate, according to a 2017 survey conducted by Allianz Partners.

Special Considerations

Some providers offer refunds only for major health conditions, requiring documentation of costs and a doctor’s recommendation to quit school—not for poor grades or a change of mind. Since most students are young and healthy, insurance may not be necessary. Policies also differ in the refund percentage: One company may refund 100%, while others refund 75% at a lower premium.

Many colleges have policies for mid-semester student withdrawals. For example, Boston University will refund 20% to 100% of tuition depending on the timing of withdrawal.

Due to increased uncertainty surrounding enrollments and college attendance during the global COVID–19 pandemic, some tuition insurance providers are limiting their coverage for that illness. Check with your insurance provider for any exceptions or limitations the pandemic may impose.