Student Debt Is At An All-Time High. Could Insuring Degrees Be A Solution?
Sierra Golding didn’t plan on going to college after graduating high school in 2015, mostly because she couldn’t afford it. Instead, she went abroad to teach English.
A couple years later, her high school debate coach called and said the team at the University of Utah wanted to recruit her, and that it would pay for school.
She accepted the offer, in part, because the coach pitched it to her as a done deal.
“That summer rolled around and I reached out to him and I was like, ‘Hey, I don't see my scholarship on my financial aid page,” Golding said. “And he was like, ‘Well, you didn't apply.’ And I was like, whoa, whoa, whoa, what?’”
By that point, she was already signed up for classes and figured she should finish what she started. But to do that, she’d have to take out loans. Unaware of some of the low or no-interest government options available, she signed up with a private, third-party lender.
Then, in 2020, the coronavirus pandemic arrived. Her mom lost her job and their family house, and Golding needed to find work to help out.
She’s a senior now and still in school, balancing several side hustles with an 18-credit course load, but the stress of it all has forced her to take a few breaks during her college career.
"American Dream Insurance"
Golding is the kind of student Wade Eyerly thinks he might be able to help. His idea is to provide insurance on her college degree.
Eyerly is Brigham Young University grad, former Pentagon economist, and has worked on finance committees for Sen. Mitt Romney and former Gov. Jon Huntsman. He co-founded Degree Insurance, a startup with offices in Utah and Illinois, to provide what it calls “American Dream Insurance” for college students.
Eyerly said the way it works is a college would buy the insurance on behalf of an incoming freshman class. It costs the school between $1,000-$4,000 per person. Students can change majors as often as they want, but whichever degree they graduate with determines their level of coverage. For five years after students graduate, they send the company their tax returns. If they don’t earn what they are expected to in total over those five years, they get a check for the difference at the end.
To qualify, students have to graduate within six years and prove they’re at least looking for work, if they haven’t found a job.
Eyerly said the idea is to take the risk out of paying for college by ensuring students will make money after graduating.
“Getting a college degree could be the largest uninsured investment you'll make in your life,” he said. “Buy a house, you've got insurance. Buy a car, insurance. Buy a cell phone, it's got insurance. You buy a degree, we just kind of hope for the best.”
Eyerly said his company has spent years analyzing data, looking at things like U.S. Department of Education reports on average graduate earnings and even purchasing private information. They came up with salary predictions for every major at every school in the country.
A student at Utah State University, for example, could expect to earn at least $41,000 a year with a degree in business, $53,000 for computer information sciences and $25,000 dollars for English.
The numbers vary by school.
The Student Debt Crisis
The Biden Administration extended the moratorium put in place by the Trump Administration for repayment of federal loans until later this year. It also cancelled more than $2 billion in loans for some students and is considering more.
Eyerly said loan forgiveness also doesn’t solve the underlying problems with college tuition: the rising cost and the inability for some students to pay it off.
There are ideas out there. A handful of schools across the country, including the University of Utah, along with federal loans offer income share agreements. They help students pay for school upfront, but take a percentage of their earnings later on.
Eyerly said his concept takes that a step further though. Offering students a minimum salary after graduating, he said, creates a safety net in case students can’t land a well-paying job right away — a buffer between students’ first, maybe low-paying job and the higher income they’ll hopefully have five years down the line.
“That safety net is going to be critical to getting diverse populations, to getting underrepresented folks, first generation Americans and students into colleges and then helping them see it all the way through,” he said. “They carry more risk than families that have a financial cushion to fall back on.”
Eyerly said promising students a minimum salary if they graduate could also be the incentive they need to make it all the way through.
Finances are often one of the main reasons they leave early.
“It seems like oftentimes it gets harder for me to keep going and crossing the finish line, because that in and of itself is expensive,” Golding said. “You know how much debt you have and it's accruing.”
Evaluating Degree Insurance
Golding said having a safety net for her degree would be nice. She’s majoring in Peace and Conflict Studies, and while there are many internships and entry-level positions she’d love to take, they pay little to no money.
Still, she said it’s hard to imagine insurance wouldn’t also make college even more expensive than it already is — which is what caused the student debt crisis in the first place.
In theory, Eyerly said colleges wouldn’t have to raise tuition.
“If your revenue stream is tuition dollars and we can get students confident enough to enroll, you get more students in college and they stay for longer,” he said. “It actually supports the university's bottom line.”
Jeff Strohl, director of research at the Georgetown University Center on Education and the Workforce, said it’s feasible that colleges wouldn’t have to raise prices, but some skepticism is warranted.
He said helping people pay off debt through guaranteed earnings could be a great thing, as well as a motivator for students to both enroll in and finish college.
He also questioned the business model. To make sure the product really does provide some value to society — and not just profits for the company — it should probably be targeted towards fields that he said are vital to society, but low paying, such as teaching or social work.
“If we want to keep investing in those programs and we're going to force the individual to carry the debt, that's, I think, where we want to insure,” Strohl said. “But that is naturally a place where a profit-motivated insurer would tend not to insure.
On the other hand, he said it doesn’t really make sense to insure degrees with lots of available jobs and higher earning potential, like engineering.
For all the questions degree insurance raises, however, most will have to remain unanswered for now. The company still has a major hurdle to clear: convincing schools to try it out.
Eyerly said his company is licensed in Utah and Illinois, meaning they can legally operate as an insurance provider. They are close to deals with two colleges — he wouldn’t say which ones — but none have actually bought the product yet.
“We can make a lot of inferences about how it should perform,” Eyerly said. “You can just map human behavior and kind of see if you make it less risky, more people will do it, et cetera. But I can't point and say over there at BYU, they did this and it increased enrollment 7%.”
That means students like Golding are still stuck with ballooning college expenses. She said it’s a risk she simply has to accept.
“When I think about ‘Well, what if this doesn't work out?’” she said, “it's not really an option. As a culture and a society, I think that we value education. And I have to believe that my education was valuable.”
She said she wants to break the cycle of poverty in her family, but the chances of her doing that without a degree are slim.