College is a big investment, as expensive as buying an automobile or a
house. You insure your car and your home, why not insure your child's
college education?
Tuition refund insurance provides a full or partial refund of college
costs -- including tuition, fees, room and board -- in the event your
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child is forced to withdraw midway through the school year for medical
or other reasons. A handful of colleges (and private elementary and
secondary schools) offer tuition refund insurance through third party
insurers.
The cost is typically 1% to 5% of the face value of the coverage per
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Most tuition refund insurance programs will provide coverage for
medically necessary withdrawals due to illness or injury, death of the
student or death of the parent or guardian. Coverage for these
situations is usually at 100%.
Some programs also provide coverage for involuntary job loss or
relocation, mental health withdrawals, voluntary withdrawal and
dismissal or suspension for academic or disciplinary reasons. This
coverage usually involves coinsurance that reduces the benefit by 10%
to 40%. Mental health coverage, for example, is typically limited to
60%.
The amount of the benefit is also reduced by the amount of any refunds
due from the college.
Most policies include a preexisting condition exclusion of 6 months to
a year. However, the preexisting condition exclusion may be waived
after 6-12 months of coverage, depending on the policy.
There are also usually exclusions for suicide or intentional
self-injury, injuries from participation in protests and
demonstrations, and withdrawals due to the use of controlled
substances or alcohol abuse.
Is Tuition Insurance Necessary?
Is tuition refund insurance really necessary? After all, most 17-20
year olds are healthy and most colleges will provide a partial refund
if the student withdraws.
Most colleges will provide refunds prorated based on the percentage of
the semester completed before withdrawal, paralleling the federal
regulations regarding the return of federal student aid
funds. However, some do not, so it is important to ask about the
college's refund policy. Even when the college has a generous refund
policy, the family will still incur some costs.
Also, while federal education loans will be discharged in the event of
the death or total and permanent disability of the student or if the
school closes before the student's graduation, most private student
loans do not provide such discharges.
Tuition refund insurance might not be financially worthwhile, but it
does offer peace of mind. This is especially true at higher cost
private colleges and for families who don't qualify for financial aid.
Sources of Tuition Refund Insurance
While tuition refund insurance has been around for more than 75 years,
there are still only two companies offering it.
A.W.G. Dewar, Inc.
offers the Tuition Refund Plan
and Education Insurance Plans (EIP)
offers the Tuition Protector.
For additional information, see Tuition Refund Insurance on the FinAid site.
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