An insurance company is pitching a new policy to colleges and universities that would guarantee graduates a specified annual salary for the first five years after graduation. 

Since many young graduates barely make enough to pay off their loan debt, Degree Insurance, the brainchild of Wade Eyerly, is ensuring that students with a college degree can land well-paying jobs, making the debt burden less scary.

How it Works for Students

A college or university purchases the insurance policy — called American Dream Insurance (ADI) — for an incoming class of students. Keeping in mind the college and major, the insurance calculates a warrantied salary amount for the students after graduation. The insurance guarantees that upon graduation students will earn this amount or more for the next five years. 

ADI ensures that students get a return on investment on their college degrees. If they do not earn the income specified in the insurance policy, the organization pays off the difference between the guaranteed amount and the actual amount.

What’s in it for Colleges

According to the company, colleges will be able to profit within a few years of purchasing the insurance. Eyerly’s team predicts that in three years, colleges will recover their investment through massive enrollment.

“With enrollments down 3-16 percent this year, colleges are experiencing a new kind of financial pain,” Eyerly told Forbes, adding how the pandemic has shattered the hopes of many for a college education and “scared a generation of kids away from making long-term investments in their future.” 

The company is now in the process of finalizing its first clients. Eyerly expects colleges to make final decisions within the next two months.

For years, colleges and universities have struggled with providing different kinds of guarantees — tuition, graduation, and employment — to attract more students. However, insuring students’ salaries is a bold step, one that may encourage more students to enroll in post-secondary education without the fear of loan debt.