NEW YORK (MainStreet) —It’s April. This is the month students are choosing their schools and parents are writing their deposit checks.
While you can’t protect your stock market investments, you can protect your investment in higher education.
Sandra Rizkallah did just that. The co-founder of the nonprofit Plugged in Teen Band Program, Rizkallah purchased tuition insurance, and it paid off to the tune of about $11,000 when her daughter had to temporarily withdraw from college for health reasons. All Rizkallah had to do was submit a claim.
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For about 1% of the price of tuition, parents, students, or whoever is footing the bill, can get this added protection for any accident, illness or injury that would cause the student to withdraw, according to John Fees, who leads Sallie Mae Insurance Services and is co-founder of Next Generation Insurance Group. However, just like health insurance used to be before parity, coverage for psychological disorders such as depression or anxiety requires a diagnosis and 48-hour hospitalization. The insurance also kicks in if the tuition payer dies.
As with other investments, if you have a stomach for risks but still have some aversion, you can purchase a percentage of coverage.
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True, schools typically reimburse part of the tuition, with a reduction in amount as the weeks go by. And it’s also true students can take an incomplete, if they make up credits at at some later point. But there’s a hole in time where if a student drops out, the investment is lost.
“Most colleges and universities have a refund schedule that is limited in what it provides the student,” says David Galvin, who heads up Education Insurance Plans. “Typically, it is on a reducing percentage as the semester goes by. For example 100% before school starts, 90% in the first 2 weeks, 75% in weeks 2 to 4...ending with no refund by the 8th week.”
It’s cheaper to buy tuition insurance through the school versus Sallie Mae, but not all schools offer it, so it could be a factor in evaluating which school to attend, Fees says.
Another factor to consider: Universities differ in their approach to how coverage works and typically don’t refund activity fees and costs for dorm, food and books, Fees says. Some schools may cover 25% and offer insurance to cover the other 75%, he says. Sallie Mae-backed insurance covers 100% of tuition, academic fees, unused room and board, books, and the unused portion of prepaid meal plans, he notes.
“Families should ask their college and university if they provide access to tuition insurance and check their university refund policy while evaluating their own potential financial loss,” Fees advises.
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