With Higher College Costs, More People Buy Tuition Insurance
As the cost of college continues to increase, tuition insurance is becoming more popular amongst families.
If a student drops out of college partway through a semester, they can lose the money they paid for tuition and fees. But in recent years, more people are paying for tuition insurance.
Tuition insurance can protect families if their child drops out of college after the school’s deadline to obtain tuition reimbursement – typically at the semester’s midpoint.
For example, Vanderbilt University will reimburse part of a student’s tuition and room and board until about halfway through the semester. A student who drops out after that time won’t receive anything back. However, with tuition insurance, 80 percent of the $59,000 for tuition and housing can be reimbursable. The insurance can cost about $530, Chris Cook, who oversees Vanderbilt’s students’ financial accounts, told The Wall Street Journal.
These types of plans don’t cover everything. They usually cover students who leave school for medical reasons, but not for academic or disciplinary issues.
Demand for tuition insurance is rising partially from increasing college costs. The average published tuition and fees for a private college per year was $34,740 in 2017, according to the College Board.
More people are also opting for tuition insurance because of the increase in mental-health issues among college students, The Wall Street Journal reported. Parents are concerned their kids will struggle when they’re away from home. Students are also feeling greater pressure to perform and 61 percent sought counseling, according to a 2016 survey by the American Psychological Association.
In 2017, about 70,000 U.S. policies had been written, up from 20,000 five years ago, John Fees, co-founder of GradGuard, a seller of tuition reimbursement insurance, told The Wall Street Journal. He said the increase is because the rising cost of college means that most families can’t afford to lose tens of thousands of dollars. The losses can be big, whether tuition was paid for in cash or with student loans.
Many companies offer tuition insurance, with premiums around 1 percent of the school’s cost. For a school costing $20,000 per semester, that comes to around $200. According to The Wall Street Journal, at least 200 schools currently work with insurers to cover families and students when they pay a tuition bill.
Liberty Mutual Insurance began offering tuition-reimbursement policies this year, partially due to demand. Michele Chevalier, a Liberty Mutual senior director, told The Wall Street Journal that families aren’t often aware they won’t get a refund if they miss the school’s deadline.
Tuition insurance has its share of detractors. One college financial adviser said she told clients not to get the insurance because she thinks it’s usually unnecessary. She instead stresses the importance of paying attention to the school’s reimbursement deadlines, especially if a child has a mental health challenge, so they can get their money back.
Author: Debbie Baratz
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