Guaranteed Income Insurance Upon Graduation

ABOUT THIS EPISODE

Wade Eyerly, CEO and Co-Founder at Degree Insurance, joined the podcast to talk about incentivizing prospective students with a guaranteed income promise post-graduation, and the massive enrollment and retention motivation potential in doing so.

The majority of people in default ontheir student loans borrowed less than ten or rand, but never graduated higherEd. At forty percent we are dangerously close to making a more Americanfamilies poorer than welcome. You're listening to enrollment growth,university from helic education, the best professional development podcastfor higher education leaders looking to grow in Roman at their college oruniversity, whether you're looking for fresh and Roman growth techniques andstrategies or tools and resources. You've come to the right place. Let'sget into the show, welcome back to UN Roman GrowthUniversity, a proud member of the connect Edu podcast network, I'm EricHolston with helic education and we're here today with waite irly, CEO and Co,founder at degree, Insurance Wade. Welcome to the show a y thanks forhaving me on. I really appreciate it or really excited Atali today aboutincentives, perspective students with a guaranteed income promise postgraduation, but before we dig into that, can you give listeners a little bit ofbackground on Degree Insurance Yeah? Essentially, what we've built is thefirst opportunity to guarantee that a college degree works. So college is thelargest uninsured investment you'll ever make, and there's no reason thatinvestment is uninsured. You wouldn't tell someone you love to borrow tentimes their net worth and put it in Amazon stock. Why would you tell themto do that and put it in a degree? I love the metaphor if I told my love oneto do that in two thousand and three though they'd be very well off as theywould, if they had invested in their own college. Education too. That'sright way to kick us off today. Can you give us just kind of a high level overview on the concept of guaranteed income insurance? So especially, whatwe do is we sell it to a college? A college uses the guarantee to recruitand retain, but essentially what we say is hey for this one time premium perstudent: we're able to guarantee that your and I'll make up number, forexample here, but your physics majors, will make fifty one grand a year andyour business majors make forty two and your English majors. I make thirty sixand your dance majors a make. Twenty nine, whatever that sort of calendar ofoptions is for that school and students, then are free to change their major asoften as they want they're discovering who they are while they're in school,but now they know kind of what that means. You know what the impact is,they don't doesn't mean their salary seeking right. They don't have to gofor the highest outcome. Earnings right. They might discover that it's fifteenhundred bucks a year left but they're way happier at the Shakespeare majoryou know than they would have been at. You know the NICON or whatever they'vedone before so t they're free to make those choices. They do that when theygraduate for five years they're going to send us their tax returns. It'sobjective, verifiable third party document. They know what it says. Weknow what it says. You send it to us. If you didn't earn what we promised, weyou would we're going to cut you a check for them. We talk about how youbelieve this guaranteed and come insurance could maybe help partiallysaw for our current post college outcomes. Equity gap yeah. So I safetynet disproportionately catches the...

...people who are going to fall off theslack one right. If you're walking a tyger, the safety net is, there isgoing to catch more people who are less state. So when you have people who youknow we're going to make eighty eight cents on the dollar relative to a whitemale, when they graduate right, they're disproportionately going to be caughtin a safety, not that that means you don't get. The bottom piece like you'removing the bottom of out counts. So those people who carried the most risk,who have the least good outcomes. Those are the people who end up justproportionately benefiting right. They get the support. So if you were goingto go to college- and you know you were just always been that person- andthings were great for you and you're- going to end up in the ninety ninepercent tile- fantastic right- you probably won't make a claim. But ifyou're thinking like your first gen student for San American, your pelleligible your under represented minority, I mean there's a lot of folks,for whom college is still a very, very good bet. The best thing you can dowith your money right, if a college degree with a stock on the stock market,it out. PERSE, performs the market by two X and is the most consistentperformer history. It works really really well, but this thing thatdetermines whether or not your college degree pays off is none of the thingsyou think where you go to school and what you're studying your PA and whereyou published and who you studied under and at all that stuff matters, but it'smarginal. The thing that is actually determinant is the state of the macroeconomy and the year you graduate right and the economy is good Ni on a tenyears. We know one out of ten years is about whether it's nine, eleven orhousing crisis or a pandemic, or you know one out of ten years. Is You sodown cycle graduating in the wrong cycle? If you come out and you sort ofAcre your market rate at a low point, you'll go back to three percent annualwage increases right, so that the right move is often not to do that. So whatthe Self, what the wealthy do is they? They self ensure you graduate in thewrong economic environment, and you have money, you double down right. Yougo back to graduate school graduate in Roman spite. You hide from the economyin a socially acceptable way for two or three years yea, and you try to emergea different point. If you're like I was, you know a Pelele kid in the middle ofMissouri Right, a graduate, it's first Graun class after nine eleven you gotto go to work. You can you now have the option to just like give it a few moreyears set economy can recover, and that sets back your lifetime earning you,never kind of catch up. That gap doesn't close again and because now,unlike what it was ten fifteen or years or a generation ago, it takes twentyone years to pay back your lungs, so you're still paying those loans. Whenyour daughter Says Hey Dad, I got into you know I got into stake and you coson my loan and you're going to pay in mine right. It set the family back fora generation, that's really a new level of risk. So what we we did. It saidlook nine out of ten years or good years it roulette wheel where nine outnot of a ten spaces, are going to are going to hit and you're going to win soas society, it makes sense to say everyone should do this borrow as muchas you can and spend that meal and on...

...average it works. It works for theeconomy, it works for Society Works, for the government works for most folks.The problem is that any individual is not an average right. So the questionis it: Does it work for society? It does it work for you and in anindividual level, since you will individually bear the cost right, Oyour debt, then you should be thinking about. How do I, hedge that, that how Imake sure it works and there's a ton of innovation going on right now inCompardin all kinds of things on like how we find casion? Should it be freeall kind of stuff? We really sit on the other side of the equal side. Did youget what you paid for, because whatever you paid, even if it's just four yearsof your time- and you were a full ride- student right, there's a transactionthat takes place right, there's some value I supposed to be value. On theother side, there's some Ri, you were going to make. You know twelve bucks anhour in an Amazon warehouse at the High School graduate. What are you going tomake in now is a college commadation that lift over the term of your life onaverage? Is You know one to two point? Four million bucks I e it makes senseto go back to averages average students going to borrow seven grand a year takefive years to graduate and finish with thirty. Five grand in a averse couldtake twenty one years to pay it back, but that payment is a hundred andeighty one as a month on that. If you graduated college, you can pay it. Theproblem is like you can serve ice. The death. The problem is, is that fortypercent of students who enroll this year won't finish and that's the underreported piece. That's the thing that no one seems to be highlighting themajority of people in default on their student loans borrowed less than tenyear and but never graduated higher Ed. At forty percent. We are dangerouslyclose to making more American families poor than wealthy right. We enable them.They could get them in the college, they can get it, they can get the debt,but they don't get all the way out. They don't I get the degree and itdoesn't do them any good, and so what we've? What we're, hoping that aninsurance can do as you? You know your your sophomore year, you're gettingbehind everyone else seems happy cat. You know they're having lived in thecollege life, it seems like it's a great thor, everyone you're thinking toyourself, I'm going to end up a bartender anyway. Why am I doing thatright? What the insurance can do is put an angel on your shoulder that saysit's: okay, it doesn't matter if you're a part tender when you graduate it willwork, it has to work free if it doesn't they're going to cut you a check. Allyou have to do is stick it out. What we're really built to do is drive thatpersistence now, there's like it has not gone effect with enrollment andyield as well right, but persistence is where we were what we were built forand what sort of our sort of internal company mission is and that's the pieceyou have to question, and I know it's been a long time tribe. You ask thequestion about the outcomes equity, the outcome gaps that you get right acrossrace, class gene like all kinds of things, and the answer is when we can,when we can assure you that graduated, we aren't just going to put you on theladder to the American dream, we're going to hold you up and keep you therefor five years. It changes the risk Calculus, so you can afford to stay soit makes sense. I E, if you look at why people drop out eight out of the tentop answers, are all variations on. I wasn't sure it would be worth it. Ididn't think it would work for me right.

Well, that's what insurance does reallywell, you couldn't buy a home if you couldn't get fire insurance on it,because the risk like you'd be destitute for a generation if ithappens to burn down, and nobody is upset that your home didn't burn down,even though you take fire insurance this month. You know what I mean likeyour thrilled in a pay fire, inter it's great, because the one guy in yourneighborhood one time and thirty years is home, burn down, got to rebuild itand everybody wins, even though each of us essentially helped some devise thata little bit. That's what insurance does it just transfers the risk toeverybody, because it's a win for all of us to be able to do that and itunlocks the ability for all us to go by home. Well, the same thing here: If wecan insure this investment, we guarantee the outcome. It unlocks awhole lot more people who can go to college and can take that risk now andyou can see it importantly see it all the way through. I like you, helping usthink about the risk calculate specifically the individual level, sothese enrolled students are and role students at some pointbought into thatoutcomes. Promise of you know two x better than the SP five hundred overthe last twenty years. Cool I get it and value seems to make sense, but then,like it's in the way things get difficult at that point, they'requestioning that promise. Am I really going to get that better job? At theend, I really going to see the pay off. Do you believe that guaranteed in comeinsurance is a way, if not the way, to help ensure that kind of clearvisualization of exactly what after looks like in the back account in theirreal life, in order to help students continue their own self motivation interms of persisting helping us with our retention numbers. So I love the usethe word after because it's one of my favorites. When I talk about collegethe College, you choose the degree you study all of those things, it's so muchmore important. What happened after you graduate then during the four years ago.That's what determines whether or not made any sense right, and so what at eighteen, when you get into college,it's a moment of hope. It's not a moment of like financially literateclarity where you're going making this exchange of value, and you know what'sthe difference between fourteen thousand a year in tuition in forty two,I like it's not that moment it's the moment were like yes, I have achievedsomething you feel good about it and, of course you believe you're going toyou're going to beat the men right you're going to be the best engineerthere ever was or you're going to be an astern like all your presentia. Stillin trying to be so an individual level. It's not a great moment to say hey. Youshould be thinking about whether or not this works right. You don't want todampen that, but it's really important that you understand that at the riskreally gids there. So what we found that there are bars of well meaningefforts. The government stuff t college navigator, College Score Card, theytick all the data and they want to make sure that students and families havethis data and are able to use it. And what we've discovered is students andparents don't care academics use the inset right. Is that they don't care,they don't know now how to use it like eighteen year old, dark, financiallyliterate. That's why they're going to college right? They need to go, learnsome new skill like that, so it doesn't...

...work. What they do know how to do istake something back to Cosco when it breaks right. You understand what areturn policy is, which is a form of warranty of guarantee of insuranceright. You understand how that works. So what we do is we take all of thatdata and we translate it into a single data point. If you graduate in this, ifyou graduate in business, you will make forty two sand dollars a year. Now, I'mnot telling you you're going to make thirty eight five in the first year ofthirty nine one in the second year and forty two and the third right, which isall true. I'm telling you for five years on average you're going to makeforty two and at the end of that byng year period were looking. Your TaxTurks could be easier and if you didn't bone check so recovering you to thatsort of median editis, but we translated all that data into somethinga student does understand and you do want. You don't buy something at Coscothinking you're going to take it back, but you shot there because you know youcould right and so that the same thing here is unlocked buyers. You can beconfident in buying that TVA COSCO, because if it doesn't work, there's apixel in the corner yours can take it back. College has never been that way.It's the only debt. You borrow where you don't talk about the payment level.Talk about the total that on your home on your car Lak. What payment can youafford right? What payment pig eighty percent of student surveyed in Americawhen ask no matter how much they borrowed a hundred grand or hundredhoarse when act, how much their student loan payment will be? Give the sameanswer one hundred dollars a month: they'venever made a payment on anything. They never paid anything. They have nocognitive framework, for they don't understand right, and so it's toxic,it's the first legal contract you signed at eighteen. It is mob money,it's not dischargeable that it will follow. You till you die right and itstrokes your ego because you're making a bet on you, it's toxic in all of theways that make you say yeah. I want to do that right like yes, yes, I'm inhere you're going to give me money. Yes right, the system itself, if you getinto a state school at eight grand year and private school at forty and theprivate school says, will give you a fifty percent scholarship. Not only doyou think they're a better school because they cost more, you thinkthey're more invested in you because they cover in half right and yet it'sclearly a more expensive way to go to college. Now, maybe it's better, but isit two x better than that state school? I would suggest the data. They don'tsay it probably not right there in the rare circumstance at ninety right. Sowe don't make good decisions because all of the math and all the frame workswe use to that point in our life are tricking us. It's not clear in the waythat needs to be what a side effect of Insurance of this guarantee is that wetranslate all that crazy morass. All those things that are difficult, allthe EGO stroking all of that is- is something that's so easy that everyeighteen year old knows how to understand it and process thatinformation. We talk me through the financial story, the politic here. Soif a college can get insured for this, why couldn't they feel comfortablerunning this model on their own? Let's say they feel great about their degree.Programs think their market centric.

There are preparing market readystudents, they believe in their outcomes. Why can't or couldn't thesecolleges make this promise on their own and self ensure? So they could maybethere's a couple challenges. One is regulatory right. Your license is ahigher institution. Are you a financial institution right? Can you do that? Doyou want to go through that, like the the insurance filings and the rest ofit that you know it takes to to do that? Second, is you've got to be willing toaccept the level of risk right one year in ten the down year, so whatinstitution wants to be on the hook for that down here that wants to managetheir budget in a way that they can eat the down yer we, this class of kidsjust didn't, do well sorry, you graduated, in the height of the greatrecession y a right like that's a that's a level of sort of financialplanning that they probably don't want to do so piece of it's that a piece ofits regulatory and then the other one, very candidly, as we spent four yearsbuilding out to arial fares right coming to understand how to do this andhow to price this and how to make this work, and we take all the public datathat you're aware and we have proprietary date. We pull all that inand frankly, we think we know things about the outcome that universities,don't universities, are all producing. First, destination report, and thereyou know title for day and their Senate the department education, but we needlongitudinal data. I even know what happens in years, two and three andfour and five right to that same student and you've been in hired longenough. You see those first destination reports for institutions that teachstatistics for a living they're, really not that great at him. Right, like the sample sizes, are wonky.It's inconsistent methodologies. I mean it. You know it's not great, so I wouldsay it's it wouldn't be doubling down on their core confidences it's a littlebit mission creep for an institution right. I had someone once a joke. Theysaid I wonder when Harvard's going to spin off its education practice, so canfocus on its score business and managing the foundations, and you know it's a funny thing to say,but the sentiments like there right, they have seventeen twenty five. Whatever billiondollars, they got to manage that's an affici itself as a reason, thepresident's always like a finance person right and an MIT and those kindof tiche. Well, if your job is, you know not every school Harvard not ever.Schools has the same mission if your job is to take kids and give them abetter life right. Insurance helps do that, but it takes a lot of work andit's not what you're, what you want to be focused on, which is in theclassroom. You teaching, kids and hiring the best teachers and enablingthem to you know inspire those students, and so I think I think a focus thingmatters a lot there, too wade what other incentives might get triggeredwith guaranteed and come insurance. For instance, I'm curious if this mightincentive colleges to develop better career services, support, developbetter employment pathways to ensure they make good on their promise or tothe contrary, Jus the insurance. Do U risk them in a way where the supportgets worse, any theories or anything...

...you've seen already in terms of otherincentives that this is trigger on the institutional side. Well, obviously, ifyour program begins performing worse right, that's going to show up in yourcost and future years right and your coverage. Kids now are going to see.Really well hey this. This state schools got an amazing English programright and they're, always telling you that, but you didn't know the outcomethere actually like engineers at this. Other state school are worse off thanEnglish majors at this school, and I want to like study ship. You don't seethat in the data, that's a great story, but it might show up right. One of thethings we see. That's really interesting. Students will often knowdirectional ty, so they'll understand that stem majors are going to make morehigher ego salary than Non Sen. Major when they don't know, is order ofmagnated right. So how different? How much more? Because if it's fifteenhundred bucks a year- and I would rather not be an engineer- and I wouldrather study Shakespeare- you should do that Rigi, like that's a fine choice tomake, and so it can actually enable kids to end up in the happiest careersbecause they aren't scared of the unknown data like yeah. But but I knowI'm going to make more over here. It might not be that much more right andthe one that people won't tell you is ten years into your career. You'll bothmake the same amount right. So so, if you are a computer science, major freshhave school, you know a hundred percent what's go, they have and what they cando for you and how to commit to how they contribute to your company. If youhire a Shakspeare Major, I keep picking on that, but you hire on a shaksperemajor. You don't know that, so they come in to lower rate. You train themup. You know the thing you know they can be creative. You know a tocommunicate right, so you train them up, which means they get promoted fasterand ten years in your career, you're going to earn the same amount. So whenthey show lifetime earnings, it'll show that the stem major always out, ownsacross the term of their life, but it because there's an early years gap.They just don't you don't overcome necessarily, but it doesn't mean youdon't end up in the same very stable, very happy place, fingers down the road.So we think we can unlock people really going into the things they really want.I think schools could look at it and say: Hey. We've got an amazing bioscience program and we are really not good at English right. So do we want todouble down on English and get better there, or do we want to say hey we're abit since specialty? You know like direction like come here for this. Doyou want to study you wish you might go to the other school you know likethat's, they could do that they could end up specializing or they couldfigure out where the holes are a little better and what they're doing so, there's there's some good intendgood things that come about, but I think the clarity in student decisionmaking the understanding where they're at and what the impact of theirdevisions are starts to show up a lot. We've had so much stress of whichschool you get into, and the decision of what to major in will have a greaterimpact than anything you do over which school right, but parents are going tohire counselors and spend a year with you applying and testing, and all thesethings to get into the right school and when it comes to picking a major you'regoing to come home one day and say I took a philosophy class and I readNichi, I'm going to change my major and they go okay all right and had thegreater impact on your lifetime earnings and the rest. So I think webring some clarity to a lot of that, often just a defensive of Nita. Thereare some very interesting stories about...

...philosophy, majors than becoming lawstudents in of the long Tom that will likely show up in your actual tables aswell, which will be interesting to see how that I lean over time. Wait leaveus with some next steps, advice here so for institutions listening to this thinking about wow, being able topromise that what an amazing potential for that student, what an amazingpotential for our retention story: What in the mazing up front in Roman growthstory to be able to sell people on this idea of this guaranteed incomeinsurance where's that institution start next? What's their next ofconversation have internally what are their next steps? I mean reach out tous the gree insurance dot to right, wait at degree. Insurance is my email,my phone Nur, I'm easy to find right, but the advantage of the unique classname in the Internet era so reach out, because a bill board on the side of theroad that says equal pay for equal study where everybody gets the sameguarantee or you know, come to our institution where business majors areguaranteed forty two and dollars a year that moves the needle on recruiting andretention, and it will matter and where you're, to sort of get this out intohis many schools, as we can obviously so. Yeah reach out et awesome waythanks. So much for joining us today. Okay, thank you beg for how mereattracting today's new post, traditional learners, means adoptingnew enrollment strategies. He looks. Educations data driven enterprise, wideapproach to enrollment growth is uniquely helping colleges anduniversities thrive in this new education, landscape and Helix has justpublished the second edition of their enrollment growth play book with fiftypercent brand new content on how institutions can solve today's mostpressing, enrolment growth challenges download it today for free at HelosEducation Com play book, you've been listening to enrolmentgrowth university from helic education to ensure that you never missed anepisode subscribe to the show, an I tunes or your favorite podcast player.Thank you so much for listening until next time. I.

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