As nearly 3 million new college students and their families prepare to start college in the fall, now is an excellent time for parents and students to examine the financial risks of paying for college.
The pandemic has highlighted some of the difficulties of college life, as well as the refund policies of colleges and universities nationwide. This, along with the mental health crisis affecting college students, brings up some very important concerns as it relates to planning for the unexpected.
Recent data from the National Student Clearinghouse shows that one in four students who started college in 2020 did not enroll in any four-year public school in 2021. Additionally, that same report found that around 113,000 students took a leave of absence in 2021.
There are a variety of reasons why a student may leave school—most are easy to prepare for, so you can protect your family from financial loss.
Attending college is a big financial decision for students and their families. In many cases, it’s also the second largest investment families make. Before you go, there are financial risks that are important to be aware of so you’ll know how to navigate them.
Students Are Struggling With Mental Health Conditions
College students are in a crisis when it comes to their mental health. The pandemic has greatly impacted their well-being.
Nearly 40% of students experienced depression, and 1 in 3 reported having anxiety, according to a 2020 Healthy Minds Network study. Additionally, these conditions are prompting more students to consider stopping out.
Nearly one third of students pursuing a bachelor’s degree considered withdrawing from their program for a semester or more in the past six months, according to a Lumina Foundation and Gallup report published in April 2021. 76% of students who considered withdrawing cite emotional stress as the reason for stopping school, according to the same report.
Student Medical Withdrawals Are on the Rise
Several ordinary medical conditions, not just COVID-19, create financial losses for students and schools each year.
According to recent data from the American College Health Association (ACHA), conditions including concussions, mono, pneumonia, and the flu greatly impact college completion.
The ACHA assessment confirms the scale and impact of health conditions on college completion. The calculations are based on a total of 8.16 million full-time undergraduate students attending four-year non-profit institutions.
The ACHA research also reports a dramatic increase in anxiety, depression, and mental health conditions that are leading to student medical withdrawals.
Know Your College Refund Policy
While the Coronavirus pandemic has shed light on college refunds, it has also created confusion over what’s covered and what’s not.
A 2019 survey by HigherEdStudy of 179 colleges and universities found that only 6% of schools reported providing a 100% refund of tuition—down from 23% in 2015.
None of the public colleges surveyed provide full refunds, and nearly half of the schools don’t provide any refund for student fees and academic fees.
In another survey, data from the 2022 College Confidence Index by GradGuard and College Pulse indicates that 66% of students are unfamiliar with the refund policies of their college or university, and 52% report it would be difficult for them to pay for the cost of an extra semester.
If your student has to withdraw from college due to a serious illness, injury, or accident, it’s unlikely you’ll receive a full refund from the school. Tuition insurance, however, can provide a refund for a covered reason.
If you can’t afford the cost of an extra college semester, then it’s essential to consider buying tuition insurance protection prior to the start of classes. GradGuard offers plans that can provide protection per term.
Recent articles in the New York Times, CNBC and Money demonstrate the growth and value of tuition insurance. The most economical way to purchase tuition insurance is when colleges, themselves, offer the option for families to obtain this type of additional protection.
Confirm Health Insurance Coverage
Many colleges offer health insurance plans to students and require them to purchase or opt out by showing proof of alternative insurance.
According to the American College Health Association, about 10% of students get their health insurance through their school. A college health insurance plan may make sense for some students. But if you have family health insurance, your college student can remain on a parent’s plan until the age of 26.
Be sure to confirm the requirements to use your student campus health clinic and be sure not to pay twice for coverage.
If you choose to opt out of health insurance offered by your student’s college, make the college aware of your choice since many schools automatically include this fee on college bills.
Protect Yourself From the Risks of Living on or Near Campus
For many of the nearly 3 million students who live in student housing, this is the first time they’re living independently. Chances are, they’re not aware that their college or university is unlikely to replace stolen or damaged student property. Additionally, students living in off-campus housing face similar situations, where they likely can’t count on housing companies or landlords to replace stolen or damaged student property.
- On average, 1,840 fires are reported annually in campus-based student housing. (Clery Act Reports from 2009-2020)
- On average, 2,411 robberies are reported annually on college campuses. (Clery Act Reports from 2009-2020)
- 98% of colleges and universities do not replace stolen or damaged student property. (HigherEdStudy, 2017)
Families are also smart to consider purchasing renters insurance, particularly since a recent review of the top home insurance companies found that less than half of them automatically provide coverage for students living on-campus.
In addition, homeowners insurance policies are often impractical to protect students as they are subject to high deductibles or may increase the cost of your insurance if you file a small claim.
As an example, GradGuard’s college renters insurance contains an exclusive student endorsement that provides worldwide property coverage, a low-deductible, and no credit check, making renters insurance a must-have consideration for college families.
Evaluate Your Insurance Needs and Options
It’s exciting to send your student off to college, but don’t overlook the need to think through the different ways you and your family may still need to be protected.
Different types of insurance can help mitigate financial losses that come unexpectedly. In the end, the decision is based on your financial situation, any medical conditions your student may have, the refund policy of your student’s college, and how well your current insurance policies may or may not cover these circumstances.
This article is sponsored by GradGuard.
GradGuard is an authority on protecting students and families from the risks of college life. Trusted by a network of more than 400 participating colleges and universities, GradGuard is the number one provider of tuition and renters insurance today for college students. Since 2009, GradGuard has protected more than one million students at more than 1,200 unique institutions.
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