The cost of a college education is, on average, 213 percent more expensive at public universities and 129 percent more expensive at private universities than it was in 1988, according to a 2017 report by CNBC. The high price tag on college tuition, and the other costs associated with it, are a huge investment that most families will start preparing for when their child is born. As a way to protect that investment, families can purchase tuition insurance. Tuition insurance provides coverage in the form of refunding tuition and fees if a student withdraws, depending on the reason.
The rising popularity of individuals purchasing tuition insurance is attributed to this spike in cost in tuition because most families can’t afford to lose that amount of money in case of an emergency where the student needs to suddenly withdraw. Most universities have a date where, if the student withdraws before then, they’re able to get back part of, if not all, of their tuition. That date varies by school, and if a student withdraws after that date, they and their family can be stuck footing the bill for an incomplete semester.
Why would a student need tuition insurance?
If a student needs to withdraw, for any reason in most cases, most universities have a date they can withdraw by that semester and get all tuition and fees refunded, but they are usually very early in the semester.
For example, The University of New Hampshire’s date for a 100 percent refund is September 7. Students can receive a 50 percent refund if they withdraw before September 28. Students who withdraw after this date are eligible to take an ‘incomplete’ mark for their classes and finish them at a later date, but are very unlikely to receive any refund.
Tuition insurance covers the time after this period, and the gap where a student might only be partially refunded, with different plans ranging from a 50 percent to a complete refund of a student’s tuition for the semester. If a student became extremely ill (mentally or physically), couldn’t handle the pressures college, or even passed away, tuition insurance would provide compensation to the student or their family.
What does tuition insurance cover?
Depending on the plan, tuition insurance can cover different reasons for a student withdrawing. Typically, it covers if a student withdraws for medical reasons, mental or physical, or the death of a student or the person paying for the student’s tuition. In some cases, it will only offer a certain percentage refunded, depending on the reason.
For example, Allianz Tuition Insurance, a popular company for purchasing coverage, says their most commonly purchased plan is one that offers a 100 percent refund for withdrawal due to illness or injury, but the plan only offers an 80 percent refund for withdrawal due to mental health issues. For any reason regarding health, a doctor must provide a form recommending the student withdraw. Tuition insurance usually will not cover a student with a pre-existing condition, and most also don’t cover withdrawal due to academic reasons, substance abuse or disciplinary reasons. Plans are available that cover withdrawal for “any unforeseen reason,” but they come at a much higher cost than the typical plans, and typically don’t offer full reimbursement for that reason.
How much does tuition insurance cost?
Tuition insurance typically covers the cost of a semester's tuition and fees, and room and board, if a student withdraws past the school’s allotted deadline. It’s typically low cost compared to the price of tuition. The insurance premium usually starts at about one percent of the cost of a semester’s tuition and increases from there, depending on the amount of coverage.
Allianz has plans varying from paying a $29.95 flat fee to paying $600 for every $10,000 spent on tuition. Their most popular plan is paying $135 for every $10,000 spent on tuition, and covers up to $50,000 of tuition and fees semesterly. Most tuition insurance costs hundreds of dollars, in contrast to the tens of thousands spent on tuition, making it worthwhile to some individuals to have peace of mind in case of an emergency.
Is tuition insurance worth it?
The cost of tuition insurance is comparatively very low to the cost of tuition, and in case of an emergency, it can be vital to a family’s financial stability. Even if a plan only partially reimburses tuition and fees, it could help lessen the financial blow.
However, the chances of a student withdrawing for one of the specified reasons the plan covers isn’t very high, and tuition insurance can be costly if purchased every semester throughout a student’s college career. Families should evaluate the potential likelihood of the student withdrawing and whether they could overcome the financial cost associated with it before determining whether to protect their investment with tuition insurance.
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