Naturally, many families want to give their adult children a helping hand in paying for college. For parents in the US without significant savings or other liquid assets to pay for tuition, this assistance often comes in the form of co-signing for a private student loan.
But if something happens to the student that leaves them unable to finish their education, get a job, or otherwise pay off their student loans, the co-signer can be left on the hook for a significant debt.
The solution, for some families, comes in the form of a specialty insurance product called tuition insurance.
What Is Tuition Insurance?
Tuition insurance is basically what it sounds like. In the same way you purchase automobile and health insurance to protect yourself in the event of unexpected mishaps, tuition insurance covers your investment should some unforeseen problem impact a student’s ability to get a degree and make good on their student debts.
College tuition is a major investment for most families. It’s worth considering ways to protect it, like you would any other investment.
Why Do I Need Tuition Insurance?
The cost of higher education continues to skyrocket in the US and is the single largest factor when prospective students and their families sit down to figure out their college finances. In recent years, tuition has been inflating at an incredible 8% per year. While tuition inflation has dipped below the overall inflation rate in the wake of the Covid-19 pandemic, it is still ballooning at least a percent or two each year, leaving families on a budget with tough choices to make when it comes to paying for college.
An accredited, four-year college education today typically costs tens of thousands of dollars at minimum. In-state public university tuition now tops $20,000 on average, and private school tuition is nearly $50,000. Sending a single student to university represents a huge investment for any middle class or working-class family, and it’s worth protecting.
While no one wants to imagine something bad happening to a loved one, part of looking out for your child when you send them away to school is making sure they’re prepared and protected in a worst-case scenario. If your student is injured in an automobile accident, for example, and it leaves them unable to attend classes, most schools will not refund you anything for the lost semester. Nor would your automobile insurance cover anything like that.
To protect your student and your investment in a situation like that, you would need tuition insurance. The money spent on tuition can be recouped through the insurance claim process, and put towards paying for college the following semester, medical expenses, etc.
What Exactly Is Covered by Tuition Insurance?
A typical tuition insurance policy might cover $20,000 or $50,000 annually, depending on your coverage needs. This represents the maximum amount paid back to you if you need to file a claim for one of the following reasons:
- The student is unable to attend classes due to injury/illness/medical disability (this can include mental or emotional disorders that make the student unable to attend school; check your individual policy).
- The student has passed away.
Other, specialized, policies may cover other circumstances.
Remember that tuition insurance is not drop-out insurance. You cannot file a tuition insurance claim if the student willingly chooses to leave school.
How Much Does Tuition Insurance Cost?
Compared to other forms of insurance, tuition insurance actually provides a lot of coverage per dollar. At the time of this article, a $20,000 plan from a leading insurer was under $200.
The cost will vary depending on the insurer you work with and the amount you need covered, but a year of fairly robust coverage will typically only cost a few hundred dollars, even when you’re insuring at private school tuition levels.
Overwhelmed by the College Application Process?
The College Benefits Research Group is here to assist college-bound students and families with the process of scoping out schools, applying, paying for college, scheduling, and other facets of the college planning experience. Our selection of valuable, easy-to-follow workshops are available online now.
Additional Resources:
https://www.usnews.com/education/best-colleges/paying-for-college/articles/2017-05-17/tuition-insurance-is-it-right-for-your-family
https://www.nerdwallet.com/article/loans/student-loans/is-tuition-insurance-worth-it
https://www.nytimes.com/2021/08/06/your-money/college-tuition-insurance.html
https://www.cnbc.com/2021/07/23/college-tuition-insurance-could-help-with-uncertainty-due-to-covid.html
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