Though he’s worked in the insurance industry and put two kids through college, Daniel Cotter, who lives in the Chicago area, hadn’t heard much about tuition insurance until this year.
When he went online to pay tuition for his son, who’s entering his senior year at Beloit College in Wisconsin, he noticed the school had partnered with a company called GradGuard to provide tuition insurance.
Cotter reviewed the details and decided extra protection for his hard-won tuition investment was worthwhile, especially as the Delta variant continues to surge around the country.
“My son is fully vaccinated, but if something happens to him, we’d have a safety net,” Cotter says. “For the relatively small cost, it was worth the peace of mind.”
As college campuses fill up for the fall semester — many for the first time since the start of the pandemic — parents wanting that peace of mind amid an ongoing pandemic have driven a spike in interest in tuition insurance, a relatively niche product that’s been around for decades.
Tuition insurance protects families’ financial investments in the event a student needs to withdraw from school for medical reasons. It works similarly to other types of insurance: If a family is paying college tuition and a student can’t continue their education, a policy would reimburse 75-100% of payments up to the point of withdrawal, as long as the situation meets the agreed-upon terms.
Experts typically only recommend tuition insurance in specific scenarios and say that parents need to read the policies closely to make sure they understand what type of withdrawal would be covered and under what circumstances. For instance, insurance will not refund you if a college closes down but continues classes remotely. Plus, if a student is vaccinated, the chances of him or her catching COVID-19 and getting sick enough to need to drop out are statistically slim.
“It’s hard to prove students won’t be able to pursue an education during the pandemic, because some schools are going to virtual and many are more flexible about granting gap years or leaves of absence,” says education consultant Cheri Barad.
Still, according to John Fees, co-founder of GradGuard, parents like Cotter, who are seeking extra protection during the uncertainty of the pandemic, have caused the normally niche tuition insurance industry to boom. While the company has continued to grow since its inception in 2009, Fees says GradGuard has seen a 400% increase in policies since 2019, with sales doubling each year since the pandemic.
Another popular tuition insurance provider, Dewar Insurance, also reported a significant increase in participation during COVID-19.
“I think people were trying to protect themselves from the unknown," says Ragan Lower, the company’s president. “Parents were concerned about what would happen if their child became ill and had to withdraw from college.”
Joan Koven, an independent educational consultant at Academic Access, says in pre-pandemic times, people purchased tuition insurance for a few different reasons.
“In the past, students who may have struggled with success in the classroom due to psychological well-being or nontraditional learning styles have greatly benefitted from tuition insurance,” she says. The pandemic and particularly the Delta variant have introduced an even higher level of risk for these families, and for students in general.
Historically, tuition insurance can be stringent about terms — for example, it may not cover pre-existing conditions, it doesn’t cover athletic injuries, and it generally excludes pandemics.
But back in February, GradGuard announced it would accommodate claims for when an insured student withdraws from school for the covered term after becoming infected with COVID-19. Cotter said that addition is ultimately what caused him to pull the trigger on a policy for his son’s last year of college.
Dewar only covers students enrolled at particular universities. Its premium prices vary by school, and they typically cover about 75% of tuition costs. For GradGuard, Fees says, families pay about $100 per $10,000 of protection for any investments in tuition, housing, and even incidental fees, even if they’re paid for with federal or private loans.
Another reason for the surge in popularity: After so many schools had to pivot to remote learning due to COVID-19 outbreaks, Fees says families have become more rigorous about researching schools’ refund policies — and they’re typically surprised and disappointed. Most colleges will not offer a full refund after classes have started, and while you may be able to get a prorated refund, that's only available for the first five weeks of enrollment.
While tuition insurance may offer families a sense of control amidst a lot of uncertainty, education experts still don’t see it as a must-have — even now, as the pandemic peaks once again. “
Paying for insurance is always a risk,” says Barad. “There’s just no way to know what you are going to get out of it."