Tuition Insurance: Is it Right for Your Family?

Tuition insurance may seem like an unnecessary cost, but it's one that can pay off when the unexpected happens.

That was the case when Eric Del Sesto's son got sick with a respiratory condition in the middle of his sophomore year at the University of the Pacific, and his doctor recommended that he take a break from school.

It was too late in the semester to get a refund from the California university, but Del Sesto had purchased tuition insurance before the semester started. As a result, he wasn't out the $21,207 he had paid in tuition because the insurance policy reimbursed him for that semester's tuition.

"It's a lot of money at risk, and you never think anything's going to happen, but you just never know," he says.

For many families, paying for college is one of life's biggest investments, in addition to buying a house and saving for retirement. In 2021-2022, tuition and fees average $38,185 among ranked private colleges, according to data collected in an annual survey by U.S. News. The average cost of tuition and fees at ranked public colleges this year is $10,338 for in-state students and $22,698 for out-of-state students.

What Does Tuition Insurance Cover?

As the coronavirus pandemic and its variants persist across the U.S., returning to in-person learning comes with uncertainties, leading many families to consider buying additional financial protection for their paid tuition costs.

What's covered by tuition insurance, and how much, depends on the specific policy a family has chosen, but most options cover tuition in cases where a student must withdraw for medical reasons. Some policies offer broader coverage beyond illness and injury.

"While most colleges provide partial refunds for withdrawals, they are limited and usually effective only when students withdraw early in the term," Ragan Lower, president of A.W.G. Dewar Inc., wrote in an email. "Our plan dramatically enhances the college refund schedule and provides more generous refunds throughout the entire term."

For A.W.G. Dewar, a Massachusetts-based insurance company that partners with schools like Georgetown University in Washington, D.C., and Cornell University in New York to provide tuition insurance, coverage in the case of a COVID-19 illness will vary by institution.

To receive a tuition refund from Cornell, for example, a COVID-19 illness would be treated as any other illness, says Nickolas J. Bucci, the university's assistant bursar of support and cashiering. Tuition insurance at Cornell costs $193 per semester, or $386 for the 2021-2022 academic year.

"A student would need to be diagnosed with the medical condition and a doctor would need to certify that the student’s current medical condition requires the student to withdraw from the semester," Bucci says.

A recent influx in tuition insurance claims is related more to mental health than COVID-19 illness, says John Fees, co-founder and CEO of GradGuard, a major provider of tuition insurance that partners with more than 400 colleges like Harvard University in Massachusetts.

Although research in recent years has found increasing mental health concerns among college students, coronavirus-related lockdowns, campus closures and social distancing put additional strain on students' mental health. Nearly 75% of college students reported worsened mental health since the beginning of the pandemic, with 87% experiencing stress or anxiety and about 78% feeling lonely or isolated, according to a fall 2020 survey by Active Minds, a national nonprofit organization that advocates for student mental health.

What Won't Tuition Insurance Cover?

Families purchasing tuition insurance in case their student's college closes the campus during the semester due to a coronavirus outbreak should be cautious. Most tuition insurance plans wouldn't cover this kind of interruption, experts say, especially if classes continue online.

"Tuition insurance doesn't give you your money back just because schools changed the way they deliver (courses)," Fees says. "As long as you are receiving academic credit, you aren't really suffering a loss. You might have suffered a loss related to kind or quality, but it's not a real financial loss in that you are still earning academic credit."

GradGuard offers tuition insurance plans through Allianz Global Assistance that can include tuition, fees, and room and board in the case of a covered reason for withdrawal, which can include serious injury or illness, chronic illness and mental health conditions. Plans start at $39.95 for $2,500 of coverage per term, with most schools costing $110 per term for $10,000 in coverage, according to Fees.

Del Sesto, the University of the Pacific student's father, says he was careful to make sure he understood the terms of his policy: He knew he would need a statement from his son's doctor, so he encouraged his son to see a doctor right away if he got sick.

Shannon Vasconcelos, director of college finance for Bright Horizons College Coach, says families should keep in mind that a withdrawal affects only one semester's tuition, not all four years.

The timing of the withdrawal is also important to consider. Most schools have their own refund policy on a sliding scale, offering some level of reimbursement if a student drops out within the first month or two of the semester. A college's tuition refund policy can be found on its website.

At Wake Forest University in North Carolina, for example, students receive a 100% tuition refund if withdrawal occurs before the first day of classes. The amount decreases to 50% in the third week and to nothing after five weeks into the semester.

If a student drops out late in the semester, he or she might be able to make up the coursework later and eventually get credit, Vasconcelos says.

"I think these insurance policies are really only useful in the case of a midsemester withdrawal," she says. "You're kind of weighing the likelihood, 'what are the chances my child is going to withdraw for a covered medical reason right in the middle of semester?'"

Del Sesto says he was glad he bought a tuition insurance policy. He told U.S. News in 2017 that he would do the same for his two younger kids because college tuition is "a lot of money you put on the line."

"All things considered," he says, "a roughly 1% cost of insurance is very reasonable."

Trying to fund your education? Get tips and more in the U.S. News Paying for College.