Tuition Insurance: Take it or Leave it?

By Amanda Cohen on November 18, 2018

Tuition insurance: what is it? What are the benefits of investing in it? What are the drawbacks of investing in it? Who should purchase tuition insurance? Is it a scam? Is it offered through your university? Is it offered through a private company? When should I buy tuition insurance? Is it too late for me to buy tuition insurance in the middle of the semester? Is it necessary to buy tuition insurance even though the semester is almost over? Can I buy tuition insurance in the middle of the semester/year?

Let’s start off by breaking down what exactly tuition insurance is. Tuition insurance is similar to any other type of insurance you may have in your life (i.e. health insurance and car insurance). Basically, you purchase an insurance from either a private company or directly from your university and if you need to withdraw for an emergent reason (i.e. death, illness, etc.), you will get reimbursed partly, if not entirely, through the tuition insurance. Like any other insurance, tuition insurance is not a one-size-fits-all type of deal.

Depending on how much you spend on tuition insurance directly correlates with the reimbursement outcome if you have to end school early. Reasons for withdrawing from school that many tuition insurance plans cover are death, physical illness, mental health struggles, expulsion (this isn’t every company, but many of them do), financial distress, etc.

Some of you may be thinking that this is amazing and you are going to purchase some tuition insurance next semester. Others might be thinking that it’s a waste of money. And some of you still may be on the fence. Well, that’s why I’m here. I’m here to give you the pros and cons of tuition insurance.

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Pro – Sometimes Life Happens

Even when things seem great, life is extremely unpredictable. Just like when you are planning your future and you have plans from A-Z, tuition insurance can offer you the same sort of security. I know you might not want to think about it, but if you are or a family member falls ill, or if someone in your family passes away, having a backup plan if you have to leave school offers you one less thing to worry about in a time of deep sadness and crisis.

I really hope that this never ends up being the case for any of my readers, but unfortunately, these are things that we have to start thinking about as we get older (ugh, adulthood stinks). Depending on your income, your needs, etc. tuition insurance might be a top-notch idea if you have some extra funds in your bank account (better to spend that extra money on your education instead of that new top that costs $100). Another way of looking at it is a one-time payment of $250 can guarantee you will get back your $60,000 tuition if you have to leave school (talk about savings).

Con – It’s an Additional Payment You Have to Make

As if college isn’t already expensive enough (especially if you are out-of-state and don’t qualify for certain forms of financial aid), tuition insurance becomes another bill you have to pay. Between tuition, textbooks, rent, food, and other everyday necessary payments, it’s possible you might already be living paycheck to paycheck; so why add more to your burden? There are definitely different insurance options you can choose from based on your needs and your available income, but regardless it’s not going to be cheap… even if you choose a lower-level tuition insurance plan. Plus, if you don’t think you need it, it will become a hole in your pocket that you may never be able to fill again. Like many things in life, tuition insurance is “a safer way to invest in your education,” but is it really that safe if it empties your bank account in one sitting?

Pro – Better Safe than Sorry

This particular pro only really provides to people who have a loved one who is very ill, or if you are sick yourself. If you know that you have circumstances that could very well lead you to withdraw school earlier than planned, by all means, buy the tuition insurance. Yes, it may be expensive and, yes, you may not use it, but don’t let yourself spend $50,000+ for a semester you may only be able to attend a quarter of the time. If there is a greater chance that you use your tuition insurance than you not using your tuition insurance, buy the tuition insurance.

If there is a 25% chance you need the insurance and a 75% chance you don’t, then you have to take in the other pros and cons listed in this article. However, if you fall in the category where there is a 75% chance you need the insurance and a 25% chance you don’t, I would say ignore the rest of the article and buy the insurance. I know it’s the middle of the semester for most of you, so you can implement this plan the upcoming semester, or even in the Spring and Summer semesters (obviously pricing will be different for the shortened Spring and Summer semesters, so definitely look into that especially if you are looking to graduate early and spend less money on tuition).

Con – The Fine Print

When doing my research, I was reading about so many people who give tuition insurance an A+. However, as I delved deeper, I noticed that there were some “flaws” to the system. Yes, some people have had great success with tuition insurance, but others haven’t. While certain companies claim they will reimburse tuition 100%, they will only do so in particular circumstances. Some companies don’t reimburse for mental health issues, and other companies are iffy when it comes to preexisting conditions and whether or not you have symptoms of your condition the day you sign up for tuition insurance. Some companies say they will cover you 100%, but if you end up using your tuition insurance they actually only give you a 60% refund, and so on. When dealing with tuition insurance, it’s all about being informed and understanding who you can trust and who you can’t. In the same way people battle with health insurance companies, you can do the same when it comes to tuition insurance, so just make sure it’s worth the time and effort if you decide to sign up for it.

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Pro – Payment Plans

If you are reluctant to get tuition insurance because you are worried about it burning a huge hole in your pocket, don’t worry because tuition insurance companies have taken this fear into account and are willing to accommodate you. Education is extremely important and insurance companies recognize that, which is why many of them are willing to work with you when it comes to paying for tuition insurance. The most common payment plan is a monthly payment plan as opposed to a yearlong/semester-long payment schedule. Even though insurance companies will sometimes offer extra benefits if you pay up front, there are ways around it. If you can pay upfront, do it, but if you can’t and you still want tuition insurance, don’t fret! Universities will even have a representative who parents/students can work with to find a payment schedule that works for you.

Con – Less Money, Mo’ Problems

Yes, relative to other costs and other insurances, tuition insurance isn’t overly expensive. However, it still is money coming out of your wallet that you won’t see again if you don’t end up using the insurance. While some tuition insurance plans are as low as a one-time payment of $250, that’s $250 that could’ve gone towards things that you will definitely need in college—textbooks, school supplies, apartment supplies, dorm room necessities, food, transportation, etc. $250 may not seem like a lot until you realize how much you could’ve purchased if you didn’t buy the tuition insurance that you probably won’t even use. Even if you do a payment plan of $25 per month, that’s $25 that could’ve been spent on groceries. Some universities may offer a work-study tuition insurance program, which is a good way to pay off your insurance, gain working experience, and lead a fulfilling college life. If they don’t, then tuition insurance may not be worth your time or stress that you’ll feel when you can’t pay your rent.

Infographic by Amanda Cohen

Pro – Student Loans… Bye-Bye

You heard me right… some tuition insurance plans purchased through private companies and not your university may provide you with an advisor who can help you with your student loans (and maybe get even some of your student loans forgiven). $250 a semester to have even a few of your student loans taken away is HUGE. Paying off student loans can, often times, be a lifetime burden that will eat into your salary, your savings, your kids’ college funds (that’s probably way in the future for most of you, but it’s definitely something you need to think about).

In addition, many companies who offer tuition insurance work with companies that help with student loan payments. Make connections with these people. Use a conversation about tuition insurance to finagle your way into making a deal regarding your student loans. The worst these companies can say is that they can’t help you. One “no” is worth risking if it means helping you out with your student loans and college education.

Cons – Semester-Long, not Year-Long

Tuition insurance is usually only valid for one semester’s worth of tuition since most colleges and universities have people pay per semester rather than per year. So, if you see that one-time payment of $250 and are thinking that it’s a hell of a deal, take a step back and see if it’s for a semester or a year. If it’s only for a semester, tuition insurance for the year will end up costing you $500 as opposed to that beautiful looking $250. Yes, there are payment plans, but do you really want to be paying that bill every month for an entire year? That would be 25 months of $20 payments each month… that’s over two years for paying off just one year of tuition insurance.

If those numbers don’t scare you, think about it this way. The typical college student attends college for four years. Let’s say tuition insurance is $250 each semester and there are two semesters per year (a total of eight semesters of college). That is $2,000 total for tuition insurance over four years. Now, let’s say you do a payment plan of $20 per month… that is 100 months you will spend paying off your tuition insurance. Scared yet? I am.

The point of this article is not to sway you one way or the other when it comes to tuition insurance. All I’m saying is that you need to have all of the facts before deciding.

Yes, I listed some pros and cons for you, but when it comes to finances, please do yourself a favor and speak with someone whose job it is to work with students on financing and planning out their educational careers. There are so many articles and websites that give conflicting information, so don’t just rely on a Google search to make up your mind. Definitely do your research after reading this article, but still talk to someone in person, not just over the phone. You want to have an opportunity to get all of the information and get to know the person you are talking to and see if you can trust him/her.

Start by talking to your university bursar office because they are the ones who handle tuition costs and any other finances, other than financial aid, that are paid to the university. There might be someone in that office you can speak with one-on-one, or they can direct you to a person or company who will be better equipped to answer your questions. Even if you are already a senior in college, it’s never too late to purchase tuition insurance, if you choose to. Anything can happen… life can just hit you head on and you may need to leave school, so be prepared, whether that means having tuition insurance or not.

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