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College is one of the biggest expenses parents will have for their children. Over the past 20 years, tuition and fees at public institutions have increased 179%, with an average increase of 9% each year.

To add to the concerns: What happens if your student gets sick or injured and is unable to attend classes for a semester or longer? Will the college reimburse you? Not necessarily. There is, however, a product that can mitigate the risk of your student being unable to attend college courses: tuition insurance.

What Is Tuition Insurance?

Just as you have health insurance to cover costs associated with unexpected health issues, you can get tuition insurance to cover college tuition costs in the event of unexpected health issues that prevent your student from attending.

Also called tuition refund insurance, it can recoup some or all of what you’ve paid in tuition if your student experiences a serious injury or illness that prevents college attendance.

What Does Tuition Insurance Cover?

Generally, tuition insurance covers:

•   Serious sickness

•   Injury

•   Mental health conditions, including anxiety and depression

•   Death of the student or person paying tuition

You’ll need to read the fine print to find out what qualifying medical events are, as some policies will list specific illnesses, such as mononucleosis.

Imagine a pandemic sweeping the land (wild thought, huh?). Tuition insurance will not cover tuition if a college or university has to close or if your student simply isn’t comfortable attending class in person. However, if your student contracts the disease and is unable to attend classes as a result, you may be eligible for a partial refund of tuition for that semester.

To file a claim, the student must withdraw from school and a medical professional must document that withdrawal was necessary. The process can vary by policy, though.

What Does Tuition Insurance Not Cover?

It’s important to know what tuition insurance does not cover, as well. If your student leaves college for academic reasons or is on disciplinary probation, you will not be reimbursed for tuition.

Some pre-existing conditions may not be covered, so if your student has a medical condition, make sure it is covered before buying the policy.

Tuition insurance may also not cover participating in professional sports or extreme sports (like bungee jumping), participating in a riot, drug abuse, suicide, or self-inflicted injury.

Who Should Consider Tuition Insurance?

Some students or parents paying for tuition might be better candidates for college tuition insurance than others.

For students with pre-existing conditions that can be covered by a policy, it can be a good idea to purchase coverage, especially if it’s a condition that is known to keep the student bedridden or otherwise unable to function for weeks or months at a time. The reimbursed tuition money could be put toward medical bills or a future semester in college.

If you have more than one child in college, a tuition insurance policy could help you recoup costs for a student experiencing an issue that you could then put toward other college expenses.

And if the school your student is attending is very expensive, an insurance policy may allow you to relax a bit more in the event that something happens.

Let’s Talk Costs

Part of determining whether college tuition insurance is worthwhile is understanding the policy cost vs. possible reimbursement, as well as tuition costs.

While a select few schools offer free tuition, most have significant price tags. As of 2023, the average costs of tuition for:

•   In-state tuition for a four-year public university: $9,377

•   Out-of-state tuition for four-year public university: $27,279

•   Private nonprofit four-year institution: $37,641

These numbers add up over four (or more!) years, so it’s understandable that paying for an insurance policy might make sense. But, how much is tuition insurance?

Plans vary in pricing and features, but generally, you can expect to pay about 1% of the cost of tuition. Some cover other expenses like room and board, while others do not.

Buying a Tuition Insurance Policy

Currently, there are two primary providers of tuition insurance: GradGuard and A.W.G. Dewar. Some schools may work with a private insurance company, so start by asking the registrar’s office if the college has a partner for tuition insurance.

Of course, the most affordable and comprehensive coverage can be obtained by going directly through the school, if your school offers it. Make sure to ask your school about tuition insurance prior to seeking an outside provider.

To enroll in a policy, you’ll be asked about your student’s school and costs for a semester of tuition. You’ll then be given a quote, and if you want the coverage, you can purchase from there by adding a few more personal details and inputting your payment information. You’ll pay your monthly premium, just as you do with auto or health insurance.

Reading the Fine Print

Before purchasing the policy, it’s best to read the fine print. The last thing you want is to purchase a policy and file a claim, expecting to be fully reimbursed, only to find out the condition you’re filing for isn’t covered.

For example, GradGuard’s fine print discusses a pre-existing medical condition exclusion waiver. It states that pre-existing medical conditions are covered when the insured student does not have symptoms of the condition on the policy purchase date and was medically able to attend school, or if the student was covered by a similar policy by the same company within four months of the effective date of the current policy.

Other fine print items to note are whether a doctor or licensed mental health professional needs to diagnose the student with the medical condition to qualify for reimbursement, the effective date of the policy, and how to prove your loss. Not all policies will fully reimburse your tuition or other costs, so find out how much you may be eligible to be refunded before purchasing a policy.

How to File a Claim

Each insurance company has its own process for filing a claim. Be sure to read through the process, as one incorrect step could cause your claim to be denied.

You’ll need documentation for the expenses you want to claim from the college or university. You may need the registrar’s office to verify on paper that your student has withdrawn for the semester, as well as documents showing what you have paid in tuition and expenses.

You may also need a written order from your student’s doctor or mental health professional stating that your child is unable to attend school due to medical reasons. For mental health issues, hospitalization of 24 to 48 hours may be required.

Alternatives to Tuition Insurance

While tuition insurance can come in handy if medical conditions or injury force a student to withdraw, the college might offer full or partial reimbursement without insurance.

Policies vary from one school to another, so inquire with the college or university before assuming you can get expenses refunded.

Some schools will refund tuition, but only during the first five weeks of a semester. Others won’t reimburse tuition but will refund some or all of room and board expenses if students withdraw.

Prior to making a decision on whether or not tuition insurance is right for you, speak with your child’s college directly so review your options.

Is Tuition Insurance Right for You?

The bottom line: If you don’t like taking risks with your money and are concerned that your student might have a situation that results in withdrawal from school for one or more semesters, tuition insurance could be a worthwhile investment. It’s a low expense compared to tuition, so it could be well worth it should you end up filing a claim.

If your student has a pre-existing condition that would be covered, insurance could mitigate your risk of losing money should that medical condition cause a need to leave school. On the other hand, not much is covered in terms of pre-existing conditions or activities your child might be involved in, such as professional sports. In these cases, the policy would be moot if the condition isn’t covered when you file a claim.

If a student withdraws and not all costs are covered or if no policy is in place, a private student loan could be a solution to fill the financial gap. SoFi offers private student loans with flexible terms and no fees. The money can typically be used for tuition, books, room and board, transportation, and other college-related expenses.

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Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 04/24/2024 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).

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Legislation providing for a tax credit for first-time homebuyers was introduced in Congress in 2021 but is still making its way through Congress as of June, 2023. A revamp of the first-time homebuyer tax credit from 2008, the proposed First-Time Homebuyer Act of 2021, would modify the first-time homebuyer tax credit, increasing the allowable dollar amount of the credit from $8,000 to $15,000.

Unfortunately, this bill hasn’t passed, so there is currently no federal tax credit for first-time homebuyers. (A separate bill, the Downpayment Toward Equity Act of 2021, was introduced in the House of Representatives and the Senate in 2021, provides financial assistance specifically to first-generation homebuyers to help them purchase a home that they would occupy. This hasn’t passed either.)

Here’s everything you need to know about the history of the first-time homebuyer credit and what the future may hold.

What Is the First-Time Homebuyer Tax Credit?

The first-time homebuyer tax credit refers to a tax credit given in tax years 2008, 2009, and 2010 worth up to $8,000. It’s possible the term may also be used in the future as legislation for a new first-time homebuyer tax credit was introduced in the House of Representatives in April 2021.

The new proposed first-time homebuyer tax credit would typically be worth up to $15,000 for buyers whose adjusted gross income doesn’t exceed 160% of the median income for the area.

Recommended: The Cost of Living By State

First-Time Homebuyer Act of 2008

For first-time homebuyers who purchased a home between April 9, 2008, and May 1, 2010, a one-time tax credit of 10% of the purchase price, up to $7,500 in 2008 and increased to $8,000 in the next two years, was available. It was part of the Housing and Economic Recovery Act of 2008. The credit was for home purchases of up to $800,000 and phased out for individual taxpayers with higher incomes.

For home purchases made between April 9 and Dec. 31, 2008, the credit had to be repaid over 15 years, making it more of an interest-free loan than a true credit. Homebuyers taking advantage of the tax credit in the following years had repayment of the credit waived. Homebuyers who left the property before a three-year period were required to repay a portion of the credit back to the IRS.

Proposed First-Time Homebuyer Act of 2021

The First-Time Homebuyer Act of 2021 would allow qualified buyers a refundable tax credit of $7,500 for individuals and $15,000 for married couples filing jointly.

This bill amends the 2008 law to allow for higher purchase prices, revises the formulas for income, and revises rules pertaining to recapture of the credit and to members of the armed forces. It was introduced in the House by Rep. Earl Blumenauer of Oregon in April 2021 but is not yet law as of June 2023.

What Can Be Deducted After Buying a Home?

Amounts eligible for the proposed tax credit would include the purchase price of the home. The amount of the credit is 10% of the purchase price.

Given that the maximum is $7,500 per individual and $15,000 per married couple filing jointly, if you and your spouse purchased a home with a mortgage loan of $500,000, the 10% credit would amount to $50,000. You would receive a tax credit of $15,000 if you filed jointly.

If you purchased a home for $102,000 with a spouse, 10% of that would be $10,200. You would be able to claim $10,200 for the credit if you filed jointly.

Here are some possible deductions now for homeowners who itemize, though most taxpayers take the standard deduction instead:

•   Mortgage interest on up to $750,000 of mortgage debt (or up to $375,000 if married and filing separately), including discount points paid to reduce the interest rate on the mortgage.

•   Up to $10,000 of property taxes when combined with state and local taxes.

•   Home office if you’re self-employed or a business owner but not an employee of a company.

If you sell your main home and have a capital gain, you may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 if you file a joint return with your spouse.

Recommended: Mortgage Interest Deduction Explained

Who Is Eligible for the First-Time Homebuyer Act of 2021?

First-time homebuyers purchasing a principal residence would be eligible for the tax credit. Not your first time buying a house? You may still be able to qualify.

A first-time homebuyer is defined as someone who has not owned an interest in a property for the past three years. So even if you had owned a home in the past, you might be eligible to receive this credit if it hadn’t been in the last three years.

Other qualifications include:

•   A modified adjusted gross income that is under 160% of the area median income.

•   Purchase of a property that is not above 125% of the area median purchase price.

•   Must live in the home as a principal residence for the tax year.

•   Must be over 18 years of age.

To note: If you claimed a first-time homebuyer credit under the 2008 law, you would be able to claim it again. But you could claim the new credit only once, for a first purchase. Also be aware that a copy of the settlement statement must be attached to your taxes.

How Does the Tax Credit Work?

If the bill passed, the new homeowner would file for the first-time homebuyer tax credit on their taxes. The credit would first be used to offset any taxes owed by the homebuyer. Then, as a refundable tax credit, the homebuyer would get money back on top of the amount of the credit after their tax bill had been paid.

For example, if you owed $4,000 in taxes after accounting for withholdings, and you qualified for a $15,000 tax credit, you’d apply that toward the amount you owe in taxes. You would get the rest back ($11,000) from the IRS.

Taxpayers must stay in the home for the duration of the tax year in order to receive the credit. If the property is sold within four years, taxpayers may need to pay a portion of the tax credit back. The amount is subject to a schedule, which is as follows:

•   Dispose of property before the end of Year 1: Repay 100% of the credit

•   Dispose of property before the end of Year 2: Repay 75% of the credit

•   Dispose of property before the end of Year 3: Repay 50% of the credit

•   Dispose of property before the end of Year 4: Repay 25% of the credit

Homebuyer Tax Credit vs Homebuyer Grant

Another first-time homebuyer program has been introduced in Congress to help with the costs of obtaining a home. The Downpayment Toward Equity Act would award a grant of up to $25,000 to first-generation homebuyers who come from socially and economically disadvantaged groups.

The down payment would need to be for a principal residence and would not need to be repaid after 60 months of occupancy. More details on the two proposed programs can be found below:

Help for First-Time Homebuyers

Although new federal legislation hasn’t yet delivered support to first-time homebuyers, there are other first-time homebuyer programs that can help with costs.

A first-time homebuyers guide will walk you through the process of buying your first home and help answer questions.

Are you crunching numbers? Try this mortgage calculator tool. Keep in mind that some private lenders (like SoFi) allow a down payment for first-time buyers that may be even lower than FHA loans.

The Takeaway

A first-time homebuyer tax credit of up to $15,000 has been proposed for qualified buyers. That would take some of the pressure of taking the plunge into homeownership. But Congress has not passed legislation to put the credit in place.

If home buying remains mysterious, the SoFi loan help center can help clear the fog.

Photo credit: iStock/monkeybusinessimages

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Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

A lot of basic “adulting” involves a credit score. Renting an apartment? The landlord will want a credit score. Financing a car? Lenders need to see a credit score. Buying a home? You get the point.

A low or non-existent score can get in the way of your life plans. But a few simple steps can set you on the path to success.

How Many Credit Cards Do You Need?

Don’t own a credit card yet? Getting a card is a simple way to start establishing credit. (People who already have a card with a balance might want to focus on paying it off instead of applying for a new one, though.) However, it’s crucial to use a card wisely—otherwise, cards can do more harm than good.

Most people should consider applying for just one card, not five. And keep in mind that just because someone has a card doesn’t mean they have free money. Opening one new line of credit and using it responsibly is a good way to build credit.

Recommended: Does Applying for Credit Cards Hurt Your Credit Score?

How Credit Cards Impact Your Credit Score

While some people out there believe credit cards are the root of all evil, they can boost credit scores in multiple ways if used correctly. The most common credit score model is issued by Fair, Isaac and Company, aka FICO®. Your FICO Score is comprised of five factors:

•   Payment history: 35%
•   Amount owed: 30%
•   Length of credit history: 15%
•   Credit mix: 10%
•   New credit: 10%

Credit cards can be an effective tool in a new credit builder’s toolbox. When someone uses a credit card responsibly, this can potentially have a positive effect on all five FICO categories.

Payment history: Making monthly payments on time (even just minimum payments) can help your credit score. As you make consecutive monthly payments, your score should gradually increase — as long as you remain responsible with your finances in other areas of your lives.

Amount owed: Everyone has something called a “credit utilization ratio,” sometimes referred to as a “debt-to-credit ratio.” This is the ratio of debt you owe versus how much debt you can owe.

Credit cards have credit limits. Let’s say Dana’s credit limit is $10,000, and she owes $5,000 on her card. Her credit utilization ratio is 50%. If she pays off $1,000 and only owes $4,000, her ratio is 40%. The lower the ratio, the better—that’s why older adults often lecture teens and early 20-somethings to pay off their card balances in full. A low ratio means better things for borrowers’ credit scores.

Length of credit history: The longer you have a line of credit, the better it is for your score. Ideally, someone would open their first credit card and keep it for years while making payments on time and keeping their balance low.

Those who already have a credit card but have racked up debt may want to think twice before canceling their card for this very reason—they might be better off working to pay off the balance aggressively and keeping the card for longer. But if they want to remove the temptation to keep charging the card, they can cut up the credit card like Rachel does in Friends. This way, the card isn’t sitting in their wallet, but their line of credit is still open.

Credit mix: FICO likes it when people have multiple types of debt. A recent college graduate’s only debt might be student loans. To improve their credit mix, they might consider getting a credit card as well.

New credit: When someone applies for a card, the issuer checks their credit score to determine whether they’ll be approved and what the interest rate should be. This is known as a “hard credit inquiry.” A bunch of hard credit inquiries in a short amount of time looks bad for a credit score, especially for someone whose score is already low. Besides, by limiting themselves to only one card, young people who are still learning the ropes of establishing credit might be less inclined to spend recklessly.

Consider a Secured Credit Card

Young people with low credit scores (or even no scores at all) may not be accepted if they apply for a top-notch credit card. Another option is to apply for a secured credit card. This type of card is meant specifically for people who want to build credit.

To use a secured credit card, people make a cash deposit to back their credit card account. The deposit amount becomes their spending limit. For example, John makes a $100 deposit when he receives his secured credit card. He can charge up to $100 to his card before paying it off. As long as he makes payments, he can keep charging to the card as long as the balance doesn’t exceed $100. If John doesn’t make payments on time, the issuer can take money from his cash deposit.

Secured cards benefit both the consumer and issuer. The consumer can build credit, and a cash deposit makes it less risky for the issuer to do business with someone who hasn’t yet proven that they can make payments on time.

What happens to that cash deposit down the road? If all goes well, people should get back their money. Many reputable credit card issuers offering secured credit cards give consumers the option to upgrade to a regular “unsecured” credit card once their credit score improves. When the user upgrades, they should receive that deposit back.

People researching secured credit cards may want to look for issuers who will let them transition to an unsecured card. This can simplify the process of switching to a regular credit card. Plus, the borrower won’t have to hang onto an unnecessary card or cancel the secured card later—which can help the “length of credit history” part of their FICO score!

Become an Authorized User on a Parent’s Credit Card

Some people may not trust themselves to use a credit card without racking up a ton of debt. Or they have the exact opposite fear—they might never use it, so they wouldn’t be making payments to boost their payment history. The latter fear may be the case for young people who are still receiving financial help from their parents and therefore don’t have many expenses to put on a card.

In either of these cases, young people might consider becoming an authorized user on a parent’s credit card. The parent can call the credit card issuer to officially put their child’s name on the card.

Young people should only add their name to a parent’s card if the parent has a high credit score and solid financial habits. If the parent starts to miss payments or accumulate a ton of debt, it will negatively affect the authorized user’s credit score.

Establishing credit through a parent’s card can help someone acquire a decent score before getting their own credit card. If they have a good credit score prior to applying for their first card, they might be approved for a harder-to-get card at an attractive interest rate. After receiving their own card, they might decide to remove their name from the parent’s card so they can have sole control over their personal credit score.

Pay Bills on Time

Okay, we’ve established that making monthly credit card payments positively contributes to the “payment history” part of a credit score. Credit cards aren’t the only things people can pay on time, though. Making timely payments on things like car loans or student loans also helps.

Certain bills don’t show up on credit reports, such as cell phone bills and insurance payments. While paying those bills doesn’t improve people’s credit scores, skipping payments can certainly hurt their scores. When people default on their payments, their credit scores can take a major hit. So it’s important for people to pay all their bills—even the ones that aren’t on their credit reports.

Take out a Credit-Builder Loan

Just as secured credit cards exist for people trying to build credit, there are special loans for this purpose, as well. These are called credit-builder loans, and they are usually offered by smaller banks and credit unions.

When people take out credit-builder loans, the loan amount is held in a separate bank account until the borrower pays off the full amount. By making payments on time, the “payment history” part of people’s scores should gradually improve. Borrowers do have to pay interest on the loan, and the percentage will depend on the lender. But there’s a huge bonus: Once people pay off the loan, they get to pocket the full loan amount and the interest they’ve paid. Not only do they walk away with a better credit score, but they now have money to put toward their emergency fund or student loan payments.

While people don’t need a good score to be approved for a credit-builder loan, they do need proof that they earn enough money to make monthly payments on time. They may need to provide documents such as bank statements, employment information, housing payments, and more.

Considering taking out a credit-builder loan? When shopping around, it is a good idea to keep an eye out for factors like APR, required documents, term length, loan amount, and additional fees before making a decision.

Be Patient

Establishing credit is the perfect example of “slow and steady wins the race.” People shouldn’t get discouraged when their credit score doesn’t surge after two months of making payments on time. And if they do get discouraged, they shouldn’t give up. The important thing is to continue making payments on time and using a card responsibly. The reward will come.

Keep Track of Your Credit Score

Many people have no idea what their credit score is. By regularly checking their score, they can know exactly where they stand and how much progress they need to make to reach their goals.

Some people may be concerned that checking their credit score can lower their score. But don’t worry, only “hard inquiries” affect credit scores. Hard inquiries occur when issuers or lenders check borrowers’ scores to determine whether to approve them for a credit card or auto loan, for example. But when a person checks their own score on a website or app, this is considered a “soft inquiry” and doesn’t affect their score.

Checking credit scores is easy with SoFi. By seeing their spending and credit score all in one app, users might feel encouraged when they notice their payments are actually improving their score, further motivating them to keep their credit score in a good place for the future.

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .


External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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