Augustana College tests income insurance for transfer students

by Joseph K. Clark

Dive Brief:

  • Augustana College in Illinois is piloting post-graduation income insurance for 20 students who transfer there by August 23, billing the program as the first in the U.S.
  • The program promises students they will earn at least the average income for their academic fields for the first five years they work in those fields after graduating from Augustana. They’ll be paid the difference after five years if they don’t.
  • The insurance is offered by Degree Insurance, a company founded by a general counsel for former Illinois Gov. Bruce Rauner and an entrepreneur who founded a marketplace for charter flights.

Dive Insight:

This type of insurance differs from other offerings, such as those available to cover tuition expenses for college students who withdraw because of unexpected events like accidents or illness. It is among several strategies institutions are using to minimize students’ risk amid concerns about student loan debt and the return on investment of a college education.

Because the program attempts to set a baseline for students’ earning power after graduating, it functions differently than ideas like guaranteeing net tuition prices for future years or helping graduates who struggle to pay traditional student loans.

Augustana College

Such programs sometimes aim to attract certain students. In Augustana’s case, the income insurance program targets transfer student populations. Augustana tends to enroll slightly more than 40 new transfer students each year, said Kent Brands, external relations executive vice president. According to federal data, the college enrolled more than 2,500 undergraduates in 2019.

College leaders hope the program signals their belief Augustana graduates will do well after graduation, Barnes said. They also want to assure families who may be suspicious about the value of a liberal arts education but might be willing to consider different types of colleges in the coronavirus era.

“You only have one chance to get a customer in the college admissions and selection game,” Brands said. Degree Insurance is paying premiums for the pilot program, according to Brands. Augustana and its students aren’t footing any of the cost. If the pilot works, the idea is that colleges or other entities would pay premiums instead of students and families, Barnes said.

Incomes will be guaranteed based on actuarial information averaging earnings by academic field. Augustana gives the example of a student who graduates in an area with average annual revenue of $60,000 but only earns $55,000 annually. After five years, the insurance would make up $5,000 annually, paid in a lump sum of $25,00s.

Other offerings that seek to lower students’ financial risks when they attend college include income-share agreements. These take the place of loans but have students making payments based on how much they earn after college rather than how much they borrow. Different programs also include safety-net programs with various providers and structures — like a pledge from Depauw University in Indiana to land students a job or additional education if they struggle financially after graduating.

Also on the market for colleges or students are loan repayment assistance programs to cover student loan payments for the unemployed or those who don’t earn enough to make payments after graduation.

Research shows students are concerned about landing jobs amid the pandemic once they graduate, according to Nick Ducoff, co-founder of Edmit, a company piloting a program to make private student loan payments for students who don’t reach certain earnings thresholds after graduation. “There’s no doubt this type of offering makes sense,” Ducoff said in an email.

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