David Dulberg
November 2018

What Is College Tuition Insurance? And How Does It Work?

When you head off to college you have dreams. Maybe you hope to find your life’s passion or a career that is financially rewarding. Or, both. Maybe you already know what you want to do, and want to connect with others who have similar interests. Perhaps your interests are more social, and you want to make lifelong friends and have experiences you will remember for the rest of your life. If you are fortunate enough to have loved ones that support you on this journey, they have dreams for you, too. No one is thinking about dropping out in the middle of a semester because of illness, or worse. There are people thinking about this, though. Insurers offer college tuition insurance that reimburses the insured for tuition dollars that are spent when unexpected circumstances disrupt the college experience.

College Is One of Your Biggest Investments

For most people, a college education ranks with home buying and retirement as their biggest investments. Average in-state college tuition and fees in 2017-2018 were $9,970 per year. This does not include, of course, housing, meals, books, supplies, and transportation. If you went to a private college, it skyrockets up to $34,740 per year.

This is a huge outlay, for either a student or the family that is supporting that student. Tuition insurance protects this investment for certain covered causes, mostly medical.

Allianz, a company that offers tuition insurance, ranks serious illness as the third most likely reason a freshman drops out of college. Their list looks like this:

  1. Difficulty with work-school balance
  2. Expensiveness of tuition
  3. Serious illness or injury
  4. Stress
  5. Unprepared academically
  6. Too much socializing

Unfortunately, for some college experts, tuition insurance covers too narrow a range of reasons that students drop out. Generally, for younger, healthier people, leaving college due to serious illness is far down the list of reasons why most students drop out. Director of college finance for College Coach, Shannon Vasconcelos, says that she doesn’t often recommend college tuition insurance.

“There are lots of reasons why kids withdraw from college,” she says. “On the list of things I can think of, there may be social reasons why they withdraw, emotional reasons, academic reasons, disciplinary reasons, and financial reasons. Certainly, medical reasons are on that list, but I think they’re way down the list. It’s much less likely to occur than all those other things.”

Planning for the Worst

Companies, such as Allianz, offer different plans. Allianz offers one plan that costs $135 for every $10,000 in tuition covered and pays out 100 percent for illness or injury, and only 80 percent for mental health disorders that require hospitalization. Another broader plan offers 50 percent reimbursement for terminations other than academic failure or drug use. This costs more, though: $600 for every $10,000 in tuition.

It is important to keep in mind, according to Vasconcelos, that reimbursements are only for an individual semester, not for all college cost, or even for the full year. She also notes that colleges refund money on a sliding scale for withdrawals that occur early in a semester, making tuition insurance even less advantageous.

Though every person and family must decide for themselves, tuition insurance looks to be somewhat expensive and only occasionally helpful. Perhaps, more than anything, tuition insurance points to the high level of investment that tuition is, and requires students and families to carefully consider how they are spending their higher education resources, and what they expect in return.

Options are available to help

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David Dulberg

David Dulberg lives with his wife in the coastal hills above a narrow creek, mid-canopy in a redwood forest. He has been writing for non-profits for many years, and volunteers as a pilot on the Baum Squad, a tandem bike riding program for the Earle Baum Center for the Blind. He does not have a pet. This does not make him a bad person.

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