For the 2019 to 2020 school year, families in the U.S. spent an average of $30,017 on college.
Some students lose out on some or all of that money when unforeseen circumstances force them to withdraw before finishing the academic term.
While you can sometimes get a tuition refund from your school, it’s not guaranteed. It may not even apply if you withdraw later in the semester.
A special kind of insurance—tuition insurance—offers another way to get reimbursed if you leave school for a qualifying reason.
Below, we’ll cover what tuition insurance is, how it works, and what factors to consider before purchasing.
What is Tuition Insurance?
Tuition insurance reimburses you the cost of tuition—and sometimes room, board, and fees—if you must leave school for a qualifying medical reason. You pay a fee upfront for each semester that you want coverage.
Tuition insurance doesn’t cover everything, though. It only applies in cases of serious illness or injury, mental health conditions, and chronic illnesses. For payout, you’ll need to withdraw for a covered reason and have a doctor’s note to back it up.
What Does Tuition Insurance Cover?
Tuition insurance policies cover a single academic term—a semester, trimester, or quarter. Some companies let you purchase multiple terms at once at the start of the year. Policies are available for undergraduate and graduate students.
Only qualifying medical reasons are covered. In general, you’ll find three main categories of covered reasons for withdrawal:
- Serious illness or injury: Traumatic brain injury, mononucleosis, car accident, etc.
- Chronic illness: Autoimmune disorder like Crohn’s Disease or Lupus, diabetes, etc.
- Mental health conditions: Severe anxiety, stress, depression
A tuition insurance policy will provide more specific details about what’s covered. Usually, your reason for leaving school must be due to a disabling medical condition that would make a reasonable person withdraw from school. A doctor also needs to advise that you withdraw from school during the covered term.
What Doesn’t Tuition Insurance Cover?
Many tuition insurance policies do not cover preexisting conditions. For example, if you break your wrist a week before purchasing tuition insurance and find out later in the semester that you need to leave school for wrist surgery, the policy likely won’t cover you. Since the wrist was broken before you took out the policy, it’s a pre-existing condition.
Again, the details will all be laid out in the paperwork. But, in general, only new conditions that you are diagnosed with after you purchase your tuition insurance policy are eligible. In some cases, a chronic illness that’s currently under control might be eligible too.
Conditions Caused by High-Risk or Purposeful Incidents
Tuition insurance policies also exclude injuries or illness caused by:
- Acts intentionally committed by the student to cause illness or injury
- Participating in professional sports
- Participating in extreme sports
- Participating in a riot
- Abusing drugs
- Suicide or self-inflicted injury (it depends on the plan)
If you’re expelled from college or fail out, your policy won’t cover it. Similarly, if you withdraw from school because you don’t like it, that’s not covered either.
Who Offers Tuition Insurance?
Many colleges, like Emerson College and the University of Virginia, partner with a tuition insurance provider to secure the best rates for students. Ask the financial aid office at your college if the college offers tuition insurance through a third party.
The two biggest tuition insurance companies that colleges work with are GradGuard and A.W.G. Dewar, Inc.
GradGuard partners with more than 330 colleges and universities. Students can purchase tuition insurance directly through GradGuard as well. Covered reasons for leaving school include serious illness or injury, chronic illness, and mental health conditions. Plans can reimburse on-campus housing costs, student fees, academic fees, and tuition.
A.W.G Dewar, Inc.
A.W.G. Dewar, Inc. started offering the College Tuition Refund Plan in 1930. Only students from participating colleges and universities can purchase tuition insurance from A.W.G. Dewar, Inc. Email email@example.com or talk to your school’s financial aid office to see if they participate.
How Much Does Tuition Insurance Cost?
How much tuition insurance costs depends on how much coverage you need and what school you attend. Tuition insurance policies typically cost 1% of the total amount of costs you want to cover.
At GradGuard, purchasing tuition insurance through a participating school is significantly cheaper than buying tuition insurance on your own. For participating schools, GradGuard charges as little as 1.25%. At that rate, insuring $20,000 for a single semester costs $250.
Not everyone gets the 1.25% rate, though. For example, students who purchase a plan directly through GradGuard—not through their school—pay rates closer to 2%.
Factors to Consider Before Buying Tuition Insurance
Purchasing tuition insurance doesn’t make sense for most families since most college students are young and healthy. Still, college is an investment, so it’s understandable to want extra protection for that investment.
Of course, before weighing the pros and cons of tuition insurance, you need to find out if you’re already covered.
Most colleges and universities offer some sort of refund policy for students who withdraw. If your school has a generous refund policy that gives you your money back at any point, you don’t need tuition insurance. Save your money for other expenses.
If the school’s refund policy is nonexistent or only applies to the first few weeks of the semester, tuition insurance might make sense. Consider the following questions as you decide:
Does your school offer tuition insurance policies?
You’ll get the best deal on policies purchased through the college or university. If you need to find a policy on your own, it might not pay out as much and will likely cost more.
What medical conditions are covered?
Are substance abuse and mental health conditions covered? Or just illness and injury? What types of illness and injury? Knowing the answers to those questions can help you make an informed decision based on your child’s history.
What’s the policy regarding pre-existing conditions?
Even if pre-existing conditions generally aren’t covered, your child’s pre-existing condition still might be. You’ll need to talk to the tuition insurance provider to find out.
For example, if a lot of time has passed since your child’s last flare up with a chronic illness, the illness might be covered. Documentation from a doctor confirming that your child’s chronic illness (in its current state) won’t interfere with their ability to attend college could be enough to get the condition covered.
How does the pay-out work?
Do you get 100% reimbursement for all conditions or just a partial reimbursement? For example, GradGuard policies purchased directly from GradGuard only reimburse 80% of costs if the student withdraws due to a mental health condition. Find out specifics so that you know what to expect.
What do you need to do to file a claim?
The policy should provide a step-by-step claims process. Make sure you know exactly what it entails and how long you have to file a claim.
So, Should I Buy Tuition Insurance?
When trying to decide if you should purchase tuition insurance for your child, it’s helpful to consider the likelihood of needing it. John Fees, co-founder and CEO of GradGuard, estimates that only 1% of students withdraw each year due to a medical reason. That’s only 80,000 students—a small amount.
Of course, you might feel that your child is already at a higher risk of withdrawing for a medical reason due to their medical history. Or you might feel anxious about investing in a pricey education. Those are both valid reasons for wanting to insure your investment.
Purchasing a tuition insurance plan may make sense for you if:
- Your child has a covered pre-existing medical condition
- Your family has a history of chronic illness or mental illness
- Your child is attending an expensive private school
You want peace of mind
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Student Debt Relief Loan Refinancing Advertiser Disclosure
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply. (1)The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation. (2)$5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees. (3)This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. Information advertised valid as of 1/27/2021. Variable interest rates may increase after consummation.
ELFI: Subject to credit approval. Terms and conditions apply. To qualify for refinancing or student loans consolidation through ELFI, you must have at least $15,000 in student loan debt and must have earned a bachelor’s degree or higher from an approved post-secondary institution.
LendKey: Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
CommonBond: Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate.
Splash Financial: Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval.com
Earnest: To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest’s fixed-rate loan rates range from 3.89% APR (with autopay) to 7.89% APR (with autopay). Variable rate loan rates range from 2.50% APR (with autopay) to 7.27% APR (with autopay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms of 10 years or less. For loan terms of 10 to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 0.26% and 5.03% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 23, 2019 and are subject to change based on market conditions and borrower eligibility.
Auto Pay Discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/23/19. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice.
Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 303 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, e-mail us at firstname.lastname@example.org, or call 888-601-2801 for more information on our student loan refinance product.