Jan. 08--With less than two weeks before the end of her sophomore year at Kutztown University of Pennsylvania, Sarah Wilson came down with what she initially thought was a terrible flu in the spring of 2015. Her condition quickly worsened to a point where she was unable to function. She soon found out she had contracted a potentially fatal illness -- meningitis -- and immediately had to drop out of college.
"I had worked very hard that semester and had overcome some obstacles," said Ms. Wilson, 22, of Fleetwood, Berks County. "I was scared and disappointed. What was so upsetting is I couldn't do anything about it."
Her parents lost all they had invested in that semester of college, which amounted to about $10,000. That doesn't include the medical expenses related to her treatment. "It was devastating," said Missy Wilson, her mother. "This never even occurred to us that it could happen."
The Wilsons were not aware of it at the time, but several insurance companies offer special policies to reimburse families what they paid for tuition and room and board if a student were forced to withdraw from school prior to finishing a semester due to illness or serious injury.
One specialty insurance company, Allianz Global Assistance, went a step further when it rolled out a tuition reimbursement policy in the summer of 2015 that will reimburse families up to 50 percent of what they paid if a student withdraws from college before the end of a semester for any reason.
"Even if a student changes his mind about the college, we would pay up to half the non-refundable expenses," said Joe Mason, chief marketing officer of Allianz Global Assistance, based in Richmond, Va. Their tuition policies start at $29.95 a semester. But this one is their most expensive. It costs 6 percent of whatever tuition, room and board amounts to for a semester. For example, if a semester of college costs $10,000, the price of the policy would be $600.
"The reason why a premium is charged for [this] product is because we are allowing the customer to withdraw for any reason as long as the student is in good academic standing," Mr. Mason said. "Existing products on the market are restricted to health-related withdrawals. There is no other college cost reimbursement insurance that allows withdrawals for any reason, which makes the Allianz product very unique."
A sizable investment
With average tuition and room-and-board costs for four-year public institutions running about $16,482 a year and private four-year college costs topping $34,000 a year, college represents a sizable investment for the average household.
Pennsylvania colleges are the third most expensive to attend in the nation, according to the College Board.
Pennsylvania's average in-state tuition and fees of $13,395 (which do not include room and board costs of about $13,075) for the 2015-16 school year were surpassed only by New Hampshire at $15,160 and Vermont at $14,993, according to College Board data. Average tuition, fees and room and board at private Pennsylvania college campuses cost about $43,921 a year.
Although a small percentage of students do leave college each year due to injury and physical and mental illness, some experts on college funding say most families do not need tuition insurance, which can add hundreds of dollars to the high cost of college.
Mark Kantrowitz, publisher of Cappex.com, an online resource for college admissions and financial aid based in Chicago, said it is a personal decision for families, but he does not recommend tuition insurance.
"I see these insurance plans as more about protecting the college than the family," Mr. Kantrowitz said. "It insures that the college gets its tuition even if the student needs to withdraw. The college avoids having to fight with the family if the student withdraws before 60 percent of the semester."
Mr. Kantrowitz said that if a student does not complete at least 60 percent of a college semester, the remaining portion of the financial aid the student qualified for must be returned to the federal government.
He said that while Allianz is a major player in the tuition reimbursement market, there are other insurance companies that offer tuition reimbursement. Two other main players are A.W.G Dewar and Markel Insurance Co. Allianz is unique, he said, because it is the only one that offers the policies direct to consumers. Other companies offer the policies through the colleges.
A.W.G Dewar specializes in private grade-schools K-12. It offers tuition reimbursement if a parent needs to relocate to another city in the middle of a school year.
"This reimbursement policy may be more beneficial," Mr. Kantrowitz said. "Relocation of the parents is not an issue with college students, and most college students are young and healthy. The risk of having to withdraw is very small."
Mr. Mason said Allianz now has approval from state insurance departments in 45 states to offer tuition reimbursement policies to consumers. Their polices are available in 25 states, including Pennsylvania.
"We got into this business because of the skyrocketing cost of tuition and the fact that many parents and students don't have a good way to protect a major financial investment," he said.
Tim Grant: tgrant@post-gazette.com or 412-263-1591.
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