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Tuition Insurance Can Help Mitigate Financial Risks in Higher Education

In their original 2009 insurance policy plan, GradGuard decided not cover student withdrawal in the case of a pandemic. But as COVID-19 made its grip on the nation clearer, GradGuard’s CEO and co-creator John Fees decided he needed to rewrite the rules. During 2020, GradGuard was the only tuition insurance plan that fully reimbursed student withdrawals due to COVID-19.

GradGuard is a program manager that sets students up with insurance that covers 100% of their tuition, room, board, and school fees should that student need to withdraw due to physical injury or illness, chronic illness, or a mental health condition. Most institutions do not offer any return on investment should a student drop out after the first few weeks in the semester. With the cost of higher education continuing to rise, the risk taken by low-income families to invest in higher education has become more serious.Download 3

“The reality is, once you’re three-to-five weeks back into the term, they won’t give you money back,” said Fees. “Most don’t provide academic fee refunds. No schools provide refund for housing.”

“It’s gotten to the point where schools themselves are financially stressed. They’re not in the position to provide refunds. They’re counting on the cash flow from that semester,” said Fees. “[Schools] are a business and they operate like businesses, more than people realize. As a result, insurance is a practical alternative, and we’ve seen extraordinary growth.”

GradGuard has partnered with over 400 institutions, including historically Black colleges and universities like Howard University, Dillard University, Morehouse College and Prairie View A&M.

John Fees, CEO of GradGuardJohn Fees, CEO of GradGuard

GradGuard is not the first company to offer risk assurance. A.W.G. Dewar has been offering insurance for elite or high-cost schools since 1930, and they are still partnered with some of the biggest names in higher education: Rice University, Columbia University in New York, Duke University, Georgetown University, and Yale University to name a few. But the Dewar plans do not ensure repayment at 100%.

Some Dewar partners, like Fordham University, offer a flat rate fee to insure its undergraduate students. June 2021’s cost is leveled at $620 a semester per in-resident academic year.

GradGuard, however, offers its price at 2% of tuition, if the student gets the insurance on their own. But if a university has partnered with GradGuard, the cost lowers to 1% of tuition.

“For a school that charges $10,000 tuition [per semester] that’s a $107 cost,” said Fees, adding that its fully coverable by a student’s financial aid package or grant money.

Fees said he wants to make buying tuition insurance as simple as buying travel insurance. In fact, GradGuard’s $100 million liability is held within a larger travel insurance company called Allianz.

For Eden Schiano and Alicia M., the idea of tuition insurance was completely foreign when they started school in fall 2020. (Alicia has requested that her last name be excluded from this article). Both withdrew from their fall semesters for mental health reasons, and both received a full refund and a second chance at their education.

Alicia M. always loved school. When she toured the University of Richmond in Virginia, she immediately knew that it was the right place for her.

“It sounds cheesy, but I could really see myself there,” she said.

The University of Richmond partners with GradGuard, and Alicia’s mother took advantage of the opportunity.

“In all honesty, we took out the insurance for COVID purposes,” she said. “I got [the insurance], my brother got it, and he’s never struggled with mental health.”

Alicia did not do much research about the insurance at the time. In fact, she did not know that mental health crises were fully covered. When her mental health took a serious turn for the worst, she feared the financial pain her withdrawal could bring to her family.

“I didn’t want to feel like I made my family pay all this money and then be like, ‘oh you guys wasted it, oops,’” she said.

Alicia noted many times just how expensive mental health treatment can be. With the refunded tuition money her family received, Alicia was able to fully fund her mental healthcare. She’s worked hard to get better, and she said she finally feels ready to tackle a new semester which she will begin this fall back at the University of Richmond, “with a clean slate.”

Eden Schiano struggled with mental health and eating disorders for a large part of her youth. She brought those experiences with her to Virginia Commonwealth University. Coupled with the isolation of COVID-19 and the difficulties of taking courses online, Schiano eventually had to take a step away to help herself.

“It was one of the hardest times of my life but now, 6-8 months out of it, I couldn’t have been given a better gift,” she said. “I was amazed that I had never heard about [tuition insurance] before. I was shocked we weren’t having assemblies [in high school] talking about it. It seemed like a saving grace for someone in my situation, who hadn’t been in the best mental space or physical health.”

Fees said he hopes more colleges and universities consider offering GradGuard to all students. Doing so, he adds, will provide students with a chance for a second start, should they need it.

“We’ve got to get these kids to graduate,” said Fees. “Overcoming health conditions, and being able to get a do-over, is how we fit into the equation.”

Liann Herder can be reached at [email protected].

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