Does College Tuition Insurance Cover COVID-19?

When it comes to major life purchases, a college education is right up there with a home. For the 2019-2020 academic year alone, the average cost of tuition, fees, and room and board topped $30,500.

It makes sense that with so much unknown about how the coronavirus will affect campuses across the country, there’s a renewed focus on refund policies and tuition insurance.

Only 6% of schools refund 100% of tuition if the student needs to withdraw past the drop date for medical reasons. And most schools won’t refund academic fees, housing or books in the case of a medical withdrawal.

But before you run out and buy a tuition insurance policy, be sure it covers withdrawals due to COVID-19 (spoiler alert: It probably doesn’t). Here’s what you need to know about tuition insurance and whether it’s worth it.

What Is Tuition Insurance?

Tuition insurance protects you from losing money if you have to withdraw from school later in the semester.

Typically, schools will provide refunds on tuition if you drop out early. However, refunds are usually offered on a sliding scale and don’t include extra costs like fees or room and board.

For example, at Boston University, where classes began Sept. 2, a student who withdraws within the first five weeks can get 20% to 100% of tuition back, depending on the withdrawal date, up until Oct. 8. At UCLA, whose fall quarter begins Sept. 23, a student can withdraw through Nov. 11 and get at least 40% back.

“Colleges often have lousy refund policies if the student drops out after the census date ― also called the add/drop date,” said Mark Kantrowitz, publisher and vice president of research at Savingforcollege.com. That makes sense from the college’s perspective, since it can’t replace a student who drops out midyear. But it can be financially devastating for students who need to leave because of an unforeseen issue.

Tuition insurance, also known as tuition refund insurance, promises to refund tuition and fees if the student is forced to withdraw from the college because of illness, injury or death. It can be purchased directly through the school (if tuition insurance is offered) or through third-party sellers, such as A.W.G. Dewar and GradGuard.

Tuition refund insurance typically costs about 1% to 2% of the covered amount, according to Kantrowitz. So the premium on a $20,000 policy, for example, would be around $200 to $400. It also covers only a single academic term or academic year, and it may or may not cover room and board and other fees in addition to tuition.

Does Tuition Insurance Cover COVID-19?

The question on many college students’ minds is whether tuition insurance can protect them from losing money if they leave school due to the coronavirus.

The bad news is that most tuition refund insurance policies do not cover pandemics. Currently, GradGuard is the only national option that does. There are 350 colleges and universities that offer its Tuition Protection Plan, which covers academic fees, room and board, deposits and tuition at a 1% premium.

“However, the student must have withdrawn because they were infected with COVID-19, not because they were dissatisfied with their college’s handling of the pandemic … or because they are worried about the pandemic,” Kantrowitz said.

Of course, things may change depending on how long we deal with the virus and whether a vaccine is successfully developed and distributed. It’s always a good idea to ask your school about its tuition insurance options and whether it will cover you in the case of COVID-19.

Is Tuition Insurance Worth It?

Whether or not you’re concerned about the coronavirus specifically, you may be wondering if tuition insurance is a good idea to have in general.

“As with any insurance product, the devil is in the details,” said Ibrahim Firat, chief educational consultant at Firat Education. Most tuition insurance plans cover withdrawal only for a serious health issue. If you drop out because you’re doing poorly academically, don’t like the school or get expelled, insurance won’t cover you.

“Most college students believe they are young and healthy, and feel they probably won’t need to withdraw for medical reasons,” Firat said. “However, there are situations when it might make sense to consider buying it, and a pandemic like COVID along with other lingering uncertainties has changed this perspective.”

First, be sure you ask about your school’s refund policy. Less than a quarter of parents said their student’s college refund policy was disclosed during the enrollment process, according to a 2018 College Parents of America report.

When evaluating a tuition insurance plan, Firat said it’s crucial to read the fine print and understand what situations are covered and for how much. Some plans reimburse 100% of covered costs, while others may only reimburse 75% of your financial loss.

Firat also warned that tuition insurance might seem like a good idea if you have chronic health issues, but many policies exclude preexisting conditions.

Ultimately, you’ll need to consider your finances, health and the details of any potential policy. A few hundred dollars might be well worth the peace of mind that you’re protected in case of a medical emergency. But if you’re healthy and the plan doesn’t cover COVID-19, it may be a waste of money.