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The coronavirus pandemic caused a colossal disruption in higher education. As a result, colleges and families are looking more closely at tuition insurance to protect against future uncertainties, though it would not have been much help for students who wanted tuition refunds for a spring semester that suddenly shifted online.

Just last week, six colleges contacted GradGuard, a tuition insurance company, about offering tuition insurance to students, said John Fees, co-founder and managing director of GradGuard. The company currently provides tuition insurance to students at more than 300 public and private colleges.

The insurance kicks in after college-specific refund policies are applied. For example, students withdrawing early in the semester may be eligible to receive all or most of their tuition payments back under their college's refund policy. A student withdrawing in the middle of or late in the semester may not receive any tuition reimbursement at all. Tuition insurance helps close that gap. It can also cover room and board fees, which are excluded from many college refund policies. College refund policies vary greatly by institution.

“Tuition insurance basically provides a refund for those students who have some unexpected event happen to them,” Fees said. “Those unexpected events include illnesses like mental health illnesses or physical illnesses, injuries like concussions or accidents, substance abuse -- which is a growing source of withdrawals -- and all these underlying health problems that students are arriving at school with.”

GradGuard offers its insurance plans through the insurance brokers Allianz and Liberty Mutual. In addition to GradGuard, A. W. G. Dewar also offers some tuition insurance plans for college students.

At many of the colleges GradGuard works with, students are able to opt in to tuition insurance as they pay their bill for the semester. On average, a student can buy about $10,000 worth of tuition insurance per semester for $106, Fees said.

Rates vary by campus. At Miami University in Ohio, the default plan offers $15,000 of insurance per semester for $318 per year. At the University of Tennessee at Knoxville, students can buy $10,000 of insurance for $100.

Miami University began offering tuition insurance through GradGuard in spring 2019. Last year, 1,450 students purchased insurance plans, which was a “huge increase” over the previous year, according to Kristine Cassano, bursar at Miami. She attributed the uptick to a change in how the insurance is presented to students. Now, instead of just emails, students are given the option to opt in to insurance in the same online portals where they pay their tuition bills.

“I equate it with, if I’m going to buy an airline ticket, do I want to add this additional insurance, just in case?” Cassano said.

At Auburn University, students are also given an opt-in option to purchase insurance as they pay their tuition bills. If they choose not to purchase any, they must read and agree to the university’s refund policy, which offers limited tuition refunds based on the date and reason for withdrawal.

Michael Reynolds, executive director of student financial services at Auburn, said that offering students tuition insurance provides the university with some protection, too.

“It’s a safeguard for me because when parents call and start complaining that they didn’t get all their money back, I have to say, ‘Your child sat in this class for this amount of days. The professor had to be paid, electricity had to be paid. And we’ve made arrangements with a company to let you purchase insurance and you opted not to,’” Reynolds said.

The number of families purchasing insurance is growing, Reynolds said.

“We may see something totally different after the pandemic,” he said. “I think people might be a lot more conscious of what could happen.”

Cassano said that at Miami, some students withdrew because of the pandemic -- for medical or other reasons. Over all, withdrawal rates nationwide remained steady during the spring semester, said Todd Sedmak, manager of corporate communications at the National Student Clearinghouse.

When colleges sent students home and shifted to online-only instruction last spring, most colleges refunded students for room and board fees, but not for tuition. Dozens of class action lawsuits cropped up in response. Students and parents argue that online instruction was subpar and that students weren’t getting the education they paid for after campuses shut down. Colleges countered by saying that students are still receiving instruction and academic credit.

Both sides have a financial stake in the outcome. After unemployment rates skyrocketed, many students and families needed greater financial support. Many colleges cannot afford to refund the largest portion of their operating budget.

Tuition insurance does not solve this refund dispute. Even if they purchased insurance policies, students could not file claims over a shift from in-person to online instruction, Fees said. So if students begin on campus in the fall and are later sent home, as happened in the spring, they would not receive an insurance payout.

"We only provide a refund in the case where the student completes a withdrawal from school," Fees said. "In the case of campuses changing their instruction methods, there’s no insurance that provides coverage for that. Our insurance doesn't provide it, and I'm not aware of anybody that does. That’s just a change in form, not a financial loss."

Typically, GradGuard insurance doesn’t cover pandemics at all, though the company recently amended its policies in some COVID-19-specific cases.

“Fear of attending school because of the pandemic is not covered but Allianz is currently accommodating claims for when an insured student completely withdraws from school for the covered term due to becoming ill with COVID-19,” Fees wrote in an email. “The accommodation above is strictly applicable to COVID-19.”

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