Education

Augustana College Will Be First In U.S. To Test Income Insurance For Graduates


Augustana College, a small liberal arts college in Rock Island, Illinois, will be the first college in the U.S. to test the concept of degree – or income – insurance for its graduates. Augustana officials announced the pilot program on Tuesday.

The college has formed a partnership with Degree Insurance through which it will offer a guarantee of post-graduation income to the first 20 new transfer students who apply and are admitted between July 15 and August 23, and enroll for fall of 2021. The 20 students covered by the deal will have the average annual income for their academic field guaranteed for the first five years after graduating from Augustana.

Augustana, with a total enrollment of 2500 students, averages about 40 transfer students per year, so attracting an additional 20 transfers would boost that number by 50%.

The program is a pilot test of Degree Insurance’s unique insurance product, American Dream Insurance (ADI), which a college or university can purchase for an entire entering class of undergraduates. The insurance guarantees graduates of that institution that they will earn a given annual salary for five years after they graduate.

The warrantied salary is calculated actuarially and depends on students’ majors and the college they attend. As examples, assume a psychology major from Augustana expects to make $50,000 annually, while an Augustana graduate in business might expect an average annual salary of $60,000. For graduates who earn less than the guarantee over the initial five years post graduation, the insurance makes a payment that covers the difference between what they actually made (verified by W2s and federal tax returns) and the guaranteed amount.

If the psychology graduate earns only $45,000 a year, she would be paid the cumulative five-year difference in a lump sum payment of $25,000 at the end of five years. If the business graduate makes only $52,000 annually, he would be owed a $40,000 gap payment at the end of five years.

To remain eligible for the income guarantee, participating students must work in the United States after graduating from Augustana. If the graduate decides to go to graduate or professional school, volunteers for something like a church mission or participates in a program such as Teach for America, the coverage is paused during those years. Once a graduate accepts his or her first job in the appropriate field, the coverage kicks in.

In the Augustana experiment, Degree Insurance will cover whatever payouts need to be made so the program is being offered with no cost either to students or Augustana.

It’s a good deal for both entities. Degree Insurance gets an opportunity to brand and test its new product. Augustana gets to evaluate whether a subsequent investment in income insurance could help boost its enrollment and net tuition revenue.

“This is yet another great reason for transfer students to consider enrolling at Augustana in the fall of 2021,” said Vice President of External Relations Kent Barnds in the college’s announcement. “If the graduate doesn’t earn the expected salary for their major, the difference will be paid through the insurance program.”

“Augustana and Degree Insurance are partnering because we know that students who enrolled as new students at other institutions last fall may not have had the experience they had dreamed of for themselves,” Barnds added. “This may be the extra incentive they need to pursue an Augustana education.”

Wade Eyerly, Degree Insurance’s founder and CEO, told me, “We couldn’t be more excited to partner with Augustana College on this pilot. It’s a university that prides itself on curiosity and innovation. For the first time we’re seeing a university stand by its product – and guarantee to students that they’ll see an ROI from their studies. This is a wholly new direction for higher education, and Augustana stands out for leading the way.”

The income guarantee experiment is the latest example of Augustana creating unique opportunities for its students, a characteristic that’s earned it recognition by U.S. News as one of the nation’s most innovative colleges for 2021. As another example, since 2009, the college has offered Augie Choice, which allows every student to apply for a grant up to $2,000 for study abroad, research or an internship. Over the past decade, an average of about 550 students a year from all majors have received a total of $9 million in Augie Choice funding to pursue international study, conduct supervised research, or explore a career.

It’s a program that’s been emulated by other college and universities. Now we’ll see if income insurance is another innovation that takes hold on the higher ed scene.



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