If Your Kid Drops Out...

For some, tuition insurance may be a good idea

Among the mounds of forms you may receive when you're ready to ship your kid off to college is an application for tuition reimbursement insurance. This plan, offered by A.W.G. Dewar in Quincy, Mass., sounds like a good idea. For as little as $30 per year, but usually closer to $150, depending on the cost of tuition, fees, room, and board, it promises to refund the thousands of dollars you would otherwise lose if your child leaves school after the semester starts.

Be forewarned: The insurance kicks in only if your child gets injured or takes ill. It doesn't cover the most common reasons a college student would withdraw from school, such as financial problems, bad grades, or drug or alcohol abuse. Withdrawals for mental illness or emotional breakdowns trigger only a 60% refund, provided the student has been hospitalized for seven days.

Still, up to 10% of the students at the 167 colleges that offer the coverage buy it, says A.W.G. Dewar President Dana Tufts. Some suffer from existing medical conditions, such as asthma, that make it more likely they will file claims. Others may be athletes who stand a greater chance of getting injured. Tracy Frantel, controller at Reed College in Portland, Ore., says 100 of its 1,300 students purchased tuition insurance this year, up from just 10 students in 1996, the first year the school offered the plan. She attributes the bump to the weakened economy, which has parents worried about protecting ever-increasing college costs no matter how slim the chances they will need to use a policy.

Tuition insurance makes up the difference between your total bill and the amount the institution would give back on its own. Usually, in the case of medical withdrawals, a university refunds a prorated amount based on how long your child attended classes that semester. Policies vary in their generosity. For instance, Vanderbilt University in Nashville refunds 70% of tuition, fees, room, and board--$33,826 for the current academic year--if a student withdraws in the fifth week of classes. At Middlebury College in Middlebury, Vt., a $34,300-a-year school, you get back only 25% if your child leaves in the fifth week.

That certainly leaves a sizable chuck of change for the insurance to pick up. To support a claim, you must submit an attending physician's report. Illnesses, such as anorexia, that are both physical and psychological in nature are often considered case by case.

If your college-age child is healthy and not accident-prone, you can probably toss out the tuition insurance brochure. But Bursar Gregg Wilbur at Skidmore College in Saratoga Springs, N.Y., who sends out bills topping $34,000 a year, says: "If parents are losing sleep about whether they'll be able to afford an extra semester's tuition," the coverage is a small price to pay for a lot of restful nights.

By Brian Hindo

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