What happens to family college savings plans when students don’t finish within four years? And what if they have to leave school in the middle of a semester?
Nearly half (48 percent) of college students lack full confidence that they will finish school on time and more than half (55 percent) think they will need to take at least some time off, according to the 2017 Allianz Tuition Insurance College Confidence Index. What’s more, some 43 percent of current students say they’ve thought about withdrawing, and more than half of parents (52 percent) aren’t sure their student will graduate in four years either.
Nearly all parents and students (85%) realize the financial hit would be would be severe – on average they estimate losing $11,000 and more than 10 percent believe it could be more than $25,000. More than three-quarters of parents (78 percent) would be worried about making student loan payments if their child had to withdraw. About half of families had saved nothing for college, and the average family expected to take out $40,000 in loans.
While there is plenty of data about graduation rates and student debt, the Allianz survey bridged the gap with information about how confident students and families are that they can successfully navigate the college experience and overcome various stressors, says Daniel Durazo, director of communications for the company.
“We were shocked to find that almost half of students had thought about withdrawing,” Durazo says. “But then, it was no surprise that families thought an unexpected withdrawal would cause a significant hit to their finances. Those are big numbers to lose when families are already struggling to pay those bills.”
At Lasell College in Newton, Massachusetts, reasons for withdrawing have included a student with a concussion, another with a broken leg, illnesses among parents and job loss in the family, says James Garrant, director of student accounts. “Most often, it’s medical reasons, but it can also be their program -- wasn’t what they thought they wanted, they’re really not interested in, or the college doesn’t offer the program they wanted. Or I don’t like my roommate.”
Allianz was not that surprised to hear students were more likely to foresee withdrawing than their parents were. “The kids are in the trenches,” Durazo says. “Parents are removed from the day-to-day stressors. You’re hoping the school will step in and take care of them.”
Garrant is not surprised by that finding, either. “They’re not even considering that their children aren’t going to finish,” he says. “They’re thinking about junior with his letter sweater and studying hard. They think, ‘My child is going to be able to do it,’ not, ‘What do I need to do if my child doesn’t finish?’”
Refund Policies and Insurance
Most colleges and universities only provide a partial refund of tuition past a certain point in the semester, yet half of students and parents said they had no awareness of their schools’ refund policy, and only 16 percent said they were fully confident they understood it well, according to the Allianz survey.
The lack of awareness of schools’ policies can lead to unpleasant surprises. “Those policies are extremely important; they will dictate how much money you will get back,” Durazo says. “Schools are put in the unfortunate position of denying refunds in some case.” Lasell discusses their refund policy during the parent orientation process and pushes the information to them on the electronic bill, requiring them to initial a box acknowledging they have seen it, Garrant says.
That’s where tuition insurance comes in – companies like Allianz look at medical records and otherwise handle claims. “Schools don’t have to be the bad guy,” Durazo says. “They can get out of it and do what they do best.”
Tuition insurance provides reimbursement of up to 100 percent of tuition and fees, without being based on when the student leaves – it’s available up until the last day of the semester. “It provides tremendous peace of mind,” Durazo says, keeping the expenses families already plan to spend from getting any larger. “A benefit to the school is that it demonstrates their commitment to their families. They can keep their refund policies intact.”
At orientation, Lasell follows the talk about reimbursement with one about tuition insurance, Garrant says. “We present it as, ‘We’re not pushing this to you’ but with what you’re spending on this education, it makes sense to have peace of mind should the unlikely occur,” he says.
“Most parents have their eyes are wide open and are looking to learn as much information as possible. They know how much they’re paying. They’re very receptive to having some other safety net, should their child not be able to finish.”
Nearly 100 students took out tuition insurance policies at Lasell this school year, a “big jump” from the prior years thanks to more positive communications, Garrant says. “The more people we can make aware of it, the more people invest in it,” he says. “We have to put it out in front of parents so it’s something they can digest.”
