There’s an insurance company in talks with every one of the Garden State’s higher education institutions — all from a small Southwestern strip-mall command post. And it’s already talked Rutgers University and more than a dozen other New Jersey colleges into close partnerships.
John Fees, co-founder of GradGuard, will let you off the hook right away: He knows you haven’t heard of his Arizona-based company. …
Or, for that matter, what it does: Offering an insurance plan for college students and their families that protects them from losing tuition dollars when they’re forced to retreat from studies.
“Most people haven’t heard of us,” Fees said. “The truth is, many families thought that schools would maybe give you a refund prior to COVID if something came up. But COVID proved universities are highly unlikely to do that.”
The argument is that GradGuard’s tuition insurance product protects what can be a major investment for a family — with a semester’s tuition, plus costs like room and board, sometimes being more costly than a host of other consumer purchases covered by insurance plans.
“When I first started this (in 2009), I’d have people say, ‘Is that really such a big deal?’” he said, adding that, when national data started being compiled about how many students take a leave of absence: “It revealed that 113,000 students out of the about 8 million undergraduate students in 2021 did. If you consider an average loss of $20,000 as a fair midpoint … that’s $2 billion.
“That’s what GradGuard is designed to help families recover.”
This new relatively form of insurance coverage, which Fees said GradGuard has pioneered and remains by far the market leader, kicks in only when students withdraw from a semester due to one of several reasons:
- Injuries or illnesses. That might be mononucleosis, which more than 2% of students get every year, or a concussion.
- Chronic conditions, such as auto-immune disorders.
- Depression, anxiety or other mental health conditions.
GradGuard works with colleges to implement their own versions of tuition insurance coverage. When put in front of students, Fees said, somewhere between 20-60% of students will purchase the coverage option.
“That’s a great number for an insurance product,” he said. “It’s also voluntary. We only do opt-in products because we want students to be given an active choice, and no one billed for something they don’t want. Especially because you have athletes or those with scholarships who have no need for this. Or superwealthy families, which are in private schools in large numbers, who can recover financially from anything and wouldn’t buy it.”
The cost of GradGuard’s insurance is based on how much a student is paying for tuition. Their typical rate is around 1% of tuition for colleges and universities the company has partnered with (the rate is twice as high otherwise). Their list of partners includes more than 400 higher education institutions today.
The business wasn’t an overnight success story, Fees admits.
GradGuard’s solution began to be adopted at a higher rate by schools during the spread of COVID-19, as universities scrambled to find options for students laid low by illness or the mental health fallout of the pandemic. COVID-19 illnesses, as well as monkeypox recently, are considered covered medical reasons for claiming the tuition insurance.
In 2020 and the later part of 2021, about one-third of bachelor’s degree students and four in 10 associate degree-seekers considered putting a halt to their education, according to a Gallup survey.
GradGuard’s own 2022 College Confidence Index had similar findings, with both pointing to emotional stress as the most common reason students have considered stopping during the pandemic. The company has had a recent uptick in their customers applying for claims to get 100% refunds on a semester’s tuition.
GradGuard’s data points out that three in four college students, and more than half of their parents, report they are not at all or not too familiar with the tuition refund policy at their school.
“We think all families should be aware of the risks faced by students,” Fees said.
GradGuard also has insurance products that cover situations that may come up in students’ campus life and stays in dormitories, including losses from fire, sprinkler systems and theft.
There are other insurance companies offering those plans. Fees argues that the other players in that space put coverage limitations on electronics and other “classic ‘gotchas’ that give the insurance sector a bad reputation.”
“This might be the first insurance plan these students are ever applying for or filing claims on,” he added. “So, we want it to perform the way they expect it to.”
Fees expects more New Jersey universities will be partnering with the organization in coming years. Within a year, he expects the number of universities they’re partnered with nationally to be north of 600 — with a significant regional representation in that total.
“The Northeast has really embraced this,” he said. “Schools there are more protected than the West Coast, which hasn’t gotten there yet, or implemented it in the same way a Rutgers or a Princeton has.”