The Initial Research Behind Our Tuition Insurance Offer

In my most recent column, published on May 26, I made the case for the purchase of tuition insurance, which thanks to our partnership with GradGuard, a service of Next Generation Insurance, Inc., is now available as an embedded benefit in College Parents of America membership.In that column, I touched on the research our organization did as we put together this benefit and I would like to review more of our analysis with you today.

In 2010, College Parents of America launched the first nationally available form of tuition insurance for college students and their families.  In partnership with GradGuard, a service of Next Generation Insurance Group LLC, we began offering tuition refund insurance as an embedded benefit in College Parents of America membership.

Like many of our benefits, we designed the tuition insurance benefit based on the research and analysis of our organization President at the time – Jim Boyle.   Jim suggested a simple idea: “the risk of your son or daughter facing a medical withdrawal from college is very real. And, of course, the cost of college is very expensive. So just as you would consider insuring any other expensive purchase, you should also consider insuring your investment in college.”

Now, on to the numbers, which clearly bear out the risks I reference above.

No refunds beyond this point clip copyWithdrawal refund policies of colleges are highly variable. While some policies stipulate pro-rated refunds, others offer set amounts. Also, refund policies for students receiving federal financial aid can diverge from institutional refund policies, as the return of federal financial aid is highly regulated. Lastly, depending on school policy, some students who are withdrawing for medical reasons may be able to appeal or petition for a greater refund amount, or even for the full cost of tuition and fees, but with no guarantee, of course, of such efforts being successful.

In fact, while some schools may provide an appeal or petition mechanism for grade adjustment due to medical withdrawal, very few have a mechanism for tuition and fee adjustments due to medical withdrawal. Among those schools featuring such an appeals mechanism, the process and refund for students differ greatly.

When College Parents began offering this program in 2010 some schools, such as Florida State University and the University of Florida, provide a full refund upon receiving medical withdrawal verification. Reed College, a private school in Oregon, has a policy which states “no deviations from the refund schedule will be made except in cases of extreme hardship, of which the college shall be the sole judge.” The University of Missouri’s policy states that students who experience an unexpected medical withdrawal may appeal for a greater refund and that such refund requests are approved on a case-by-case basis.

From the above handful of examples, I hope you can see that not all refund appeals are equal in appeal process or amount, nor are some as automatic as others. Our study included 215 of the largest and most expensive colleges and universities in the country. Of that number, 34 schools, or 16% of those researched, offer an appeals process for students asking for a larger refund either as a standalone process or as part of their medical withdrawal refund policy. And of those schools offering an appeals process, the general withdrawal policy is frequently very strict. For instance, among the 34 schools:

  • 25 colleges and universities do not refund any tuition and fees for withdrawal after 5 weeks;
  • 4 colleges and universities refund more than zero of tuition and fees, but less than 50%; and
  • 5 colleges and universities refund more than 50% of tuition and fees, but not necessarily any other item that is part of what the government considers to be the “cost of attendance.”

The bottom line is this: college is often the second largest investment a family makes and the investment is worth protecting.  In 2016, we plan to share our most recent research regarding student refund policies and the efforts College Parents of America is making in trying to reduce the risk to the financial investment families make in higher education.