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Should You Buy Tuition Refund Insurance for College?

Will Tuition Refund Insurance Protect Your Investment?

With the average cost of college tuition, room and board, and fees at a four-year private institution now running around $43,000 a year, tuition refund insurance might seem like a smart way to protect your educational investment. College tuition insurance plans can provide a full or partial refund of college costs – including tuition, room and board, and fees – in the event your student is forced to withdraw before completing the school year for medical or other covered reason. Is there a downside to a tuition refund plan? Should you have tuition refund insurance for your college student?

Cost.

The cost is typically one to five percent of the face value of coverage per year. This ranges from $250 to $1,000 per year depending on the college’s costs.

What it covers.

A tuition refund plan will protect students who have to drop out of college suddenly because of a very specific event. Specifically, withdrawal from school caused by a serious medical issue such as injury, illness, or mental health issue. While it may sound prudent to protect your tuition dollars, very few U.S. college students actually drop out for these reasons. “This is, statistically speaking, relatively rare,” says Mark Kantrowitz, publisher of Cappex.com and a national expert on paying for college. “College students are typically young and very healthy. In purchasing tuition refund insurance, parents are making a bet that their kid will withdraw because of illness or injury. These are not the most common reasons why students withdraw.”

What it doesn’t cover.

Make sure you read the fine print. Most policies include a preexisting condition exclusion which would preclude coverage for known conditions. There could be exclusions for suicide, intentional self-injury, injuries from participation in protests and demonstrations, and withdrawals due to the use of controlled substances or alcohol abuse. And if you want to insure against difficulty adjusting to college life, loneliness, poor fit with a chosen college, bad grades, suspension, or anxiety about losing your job and being able to pay for tuition, this college tuition insurance plan won’t provide you any protection.

Check to see if your college has a refund policy.

Many colleges already have a tuition refund plan in place. The school’s own refund policy may return a significant portion of tuition to you. However, this does depend on the point in the semester when a student withdraws.  Williams College, for example, will refund 90 percent of tuition and room and board if a student withdraws during the first week of class. This decreases to 20 percent of tuition by the eighth week in the semester. Georgetown will refund between 80 percent and 100 percent of tuition if a student withdraws during the first month of classes. Federal regulations require that all educational institutions disclose their refund policy to all prospective students. Most college websites contain information detailing the specifics of the school’s refund policy.

Even if you purchase a tuition refund insurance policy, “it’s still a good possibility you aren’t going to recover the full amount of all tuition, room and board, and fees” says Kantrowitz. What it does buy for you, however, is “peace of mind, especially for families with students at higher cost private colleges, and for middle income families who can’t afford to pay out of pocket and also don’t qualify for full federal financial aid.” For some people, says Kantrowitz, “that peace of mind may be worth paying for.”

Jane Parent

Jane Parent, former editor at Your Teen, is the parent of three.

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