Understanding Tuition Insurance: Is It Right for You?

College tuition is expensive, with average costs in the 2022-23 school year ranging from $9,800 at public schools to $40,700 at private nonprofit institutions, according to the National Center for Education Statistics.

If you have to withdraw unexpectedly, losing that money can be overwhelming — especially since some students are required to start repaying student loans if they leave early. While some schools offer partial refunds if you withdraw by a certain date, you could still end up losing a significant amount. Tuition insurance can help protect your financial investment, but it isn't the right fit for everyone. Here's what you need to know.

What is tuition insurance?

Tuition insurance, also known as tuition reimbursement insurance, is an optional policy that can cover your costs if you need to withdraw from school for a covered reason. With this insurance, you can be reimbursed for tuition, academic fees, and room and board.

The specific situations that qualify for reimbursement depend on the terms of your policy.

Typically, policies will cover withdrawals due to:

• Serious illnesses or injuries
• Complications from chronic conditions like diabetes or autoimmune disorders
• Mental health issues, including severe anxiety or depression

The timing of your withdrawal also affects coverage. If you leave early enough for your school to issue a partial refund, tuition insurance will often cover the remaining balance. If you withdraw after your school's refund period ends, your policy may reimburse you for the full amount paid for that semester.

How does tuition insurance work?

You can purchase tuition insurance from private insurance providers, but it's important to compare policies to find the best fit. Here are a few key factors to consider:

• How much are the premiums? Tuition insurance typically costs 1% to 2% of your total tuition and fees. For example, if your tuition is $10,000, you'd pay $100 to $200 for coverage.
• How much will the policy reimburse? If you need $80,000 in coverage but your policy has a $75,000 limit, you'll be responsible for any remaining costs.
• Does the policy cover your reason for withdrawal? Make sure the policy covers the most likely reasons you might need to withdraw. For example, some insurers may not cover withdrawals due to COVID-19.

You can compare quotes from multiple insurers online to find the plan that offers the best protection for your needs.

Should I get tuition insurance?

Tuition insurance can be costly, and in many cases, it may not be necessary — especially since schools often offer partial refunds for early withdrawals. However, there are situations where it might make sense to consider:

• You have a history of health issues.
• Your school's refund deadline is early in the semester.
• You're taking on significant student debt that would be hard to repay if you had to withdraw.

Keep in mind that tuition insurance only applies if you withdraw while still enrolled. It won't help with financial challenges after graduation, such as repaying student loans.

If you're struggling with loan repayment, consider alternatives like enrolling in an income-driven repayment plan for federal loans or refinancing your private loans. Refinancing can lower your interest rate and adjust your loan terms to better suit your financial situation.

Current student loan rates

Tuition insurance vs. college refund policies

When deciding whether tuition insurance is worth it, consider your school's refund policies. Many colleges offer partial refunds based on your withdrawal date and their specific rules. These refunds don't require any sign-up or additional cost.

If your school has a generous refund policy or allows late withdrawals, you might not need tuition insurance.

You can also look into ways to keep tuition costs low, since the less you pay for school, the less risk you face if you need to withdraw. Be sure to submit the FAFSA to see if you qualify for scholarships or grants, and look for private scholarship opportunities to further lower your expenses.

FAQ

What does tuition insurance cover?

Tuition insurance covers you if you need to withdraw from school due to a covered reason, such as a physical or mental illness. Your insurance reimburses the costs of tuition, room and board, and academic fees that your school doesn't refund after your withdrawal.

How much does tuition insurance cost?

The cost of tuition insurance typically ranges from 1% to 2% of your total tuition, depending on the provider.

How do I know if my college offers a refund policy?

You can check with your college financial aid office to see if it has a refund policy. You'll usually be entitled to a partial refund if you withdraw by a certain date.

Can I get a refund if I don't have tuition insurance?

You may still be eligible for a partial refund from your school, depending on your withdrawal date and the school's refund policy.

How do I file a claim for tuition insurance?

Contact your insurer to start the claims process. You'll need to submit documentation of a covered reason for withdrawal, such as developing a physical or mental illness.