An Introduction to Tuition Refund Insurance

For most people a college education, whether for themselves or for their children, will be the largest expenditure that they ever make other than their house. Not only is college expensive, but it also spans a large block of time, requiring diligent attendance. Since a serious illness could potentially cause a student to miss an entire semester, insurers have created Tuition Refund Insurance, which does not pay for medical care like student health insurance would, but instead pays for a refund of tuition in the event of illness.

Before considering this type of coverage, look carefully into your college’s tuition refund policy. Most policies, especially at not-for-profit or government-run schools, conform to a Federal regulation referred to as “R2T4.” This regulation specifies that Federal grants and loans have to be returned on a roughly pro-rata basis if the student does not complete at least 60 percent of the semester. If the college’s policy conforms to R2T4, and the student falls ill in the beginning of the semester, he can expect to receive a large portion of his tuition back, anyways.

Tuition refund insurance can solve the problem of lost tuition dollars in the case of illness, but it cannot do anything about the cost of the illness. To solve that problem, students should look into the health insurance plans that are aimed at their needs. These plans may not cover any tuition that they forfeit due to an extended illness necessitating an academic leave, but they will pay medical costs. Having access to medical care paid for by student health insurance may also reduce the likelihood that the student needs extended leave in the first place.

A key advantage of insurance to cover tuition is that it can provide refunds in instances above and beyond when the student gets sick or passes away. Most policies also provide coverage if the student’s parents pass away and they need to leave college during the semester and forfeit the tuition. Others cover other instances, such as mental health issues or job loss. Although many of these extra types of coverage are subject to limitations or to additional costs, they can nevertheless prove handy if needed.

Ultimately, tuition refund insurance is a product, and not a panacea. In instances where a college’s tuition refund policy is not adequately generous and where there is a meaningful risk of the student having to miss the semester, it could be an excellent option. If the student just needs health coverage, though, a student-oriented health insurance policy could be more useful. Some students and their families may also benefit from taking out other types of insurance, while others would be best served to purchase no insurance, and assume the relatively rare risk that the student would miss the semester.