Imagine you are the parent of an incoming college student who wants to study theology, ranked among the lowest-paid majors after graduation. You’re proud of their conviction, but also anxious because friends and family keep reminding you that theology is a major for which career prospects are uncertain at best. Then, in the thick of college decision season, you learn that the college your child is considering offers something called “degree insurance”: If your graduate doesn’t earn above a set threshold, the program will step in to cover part of the gap.
The promise is meant to ease parents’ and students’ fears. Yet, it raises a deeper question: Why would a college degree, still the surest path to economic advancement and long-term financial stability, suddenly require insurance at all?
Across the country, colleges and universities are rolling out a new suite of financial products targeting undergraduates, marketed as “loan” and “degree” insurance. Loan repayment assistant programs (LRAPs), sometimes also called loan repayment guarantees, are a form of loan insurance that protect students against default: If a graduate doesn’t earn above a certain threshold, their student loan payments are reimbursed to a certain amount. Degree insurance is a mechanism akin to public “wage insurance” programs, where if a graduate makes less than the average income in their field adjusted for regional differences, the insurance would “top up” the difference in wages for a period of time.
These two tools have distinct origins and underlying rationales. Loan Repayment Assistance Programs (LRAPs) originated in Yale Law School in the 1980s, and spread to other law schools, as the rising cost of legal education began to deter graduates from pursuing lower-paying public interest careers. While they began as internal sources of funding, the privatization of LRAP offerings and search for profit have pushed the industry to expand into new markets, namely undergraduate education. Indeed, Ardeo Education Solutions, an early and prominent player in this sector, was founded by Yale Law graduate Peter Samuelson, who himself benefited from Yale’s loan assistance program. Ardeo positions itself as reassuring families about the risks of taking on debt in order to pay for undergraduate education, “increasing access to the life-changing impact of higher education,” and freeing students from having to choose “between their passions and a paycheck.”
Degree insurance products take a different approach. Degree Insurance, which counts Augustana College in Illinois as a client, draws on the cultural cachet of the American dream to market itself as an income equalizer; its flagship product, “American Dream Insurance,” guarantees “equal pay for equal study,” where “no graduate will have to earn less than their peers, regardless of race or gender, because everyone will have the same safety net.” This is insurance against the uncertainties and inequalities of the labor market as well as against individual weaknesses of any particular candidate.
While the current scope and reach of this sector is challenging to assess, Ardeo Education advertises that it’s provided LRAPs to more than 30,000 students at more than 200 American colleges and universities. Participating institutions range from a number of small, faith-based colleges like Lyon College and MidAmerica Nazarene University to a public research university like Eastern Michigan University. Eligibility for repayment assistance usually requires graduation from the offering institution, full-time work (30+ hours/week), and staying below the income cap.
The extension of LRAPs and degree insurance into undergraduate programs represents a new dimension of risk management in higher education, which has gone through several phases since it began in earnest in the late 20th century when colleges and universities started responding to increased personal injury and campus safety litigation. These risk management programs, tailored to protect institutions, eventually expanded to include Title IX, Occupational Safety and Health Administration requirements, environmental regulations, reputation management, crisis communications, cybersecurity and, most relevantly for this topic, financial sustainability. Loan and degree insurance represent the latest iteration of such efforts.
For now, colleges typically pay for these programs, though it is unclear how much of the cost is passed on to students through tuition. How students are selected for inclusion in these programs is also opaque. Institutions are free to determine which students and majors are offered the program. Augustana College’s website, for example, says that it offers degree insurance at no direct cost to the student, but participation is on an invitation-only basis.
There are, of course, reasons to defend these programs. Scrutiny of the student loan system, which has resulted in a student debt crisis, has intensified across the political spectrum, as policymakers from both parties recognize the harm it has caused (even as they disagree on the solutions). LRAPs and degree insurance may decrease the rate of loan default and reassure low-income families who were unable to save for college and are averse to taking on loans to pay for college.
In an environment marked by increasing competition for students, admissions professionals see offering LRAPs and degree insurance as a competitive advantage. Loan repayment and degree insurance plans also encourage students not only to enroll in college in general but to pursue degrees with more challenging career prospects, which are also often the ones at risk of being cut due to low enrollment. This is increasingly relevant given the almost daily news of program closures.
The arrival of these financial instruments is perhaps an understandable response to the rising cost of a college education, increased competition for students, overall wage stagnation and shifting public views about the purpose, value and outcomes of higher education. The adoption of these tools, however, is not simply driven by the current circulation of the idea of college education as a risk; it also further reinforces that view.
These programs are not simply a new and neutral financial option for students. By extending the logics of institutional risk management to the economic futures of students, these tools cement the troubling, and potentially self-defeating, idea that a college degree itself is a financial risk requiring protection rather than the most reliable path to upward mobility and a critical component of our continued economic and cultural prosperity. Their adoption by colleges and universities is a reflection of the “short-termism” that has increasingly marked higher education strategy. As more institutions inevitably adopt these programs, it is unclear how long they will remain a competitive advantage. Furthermore, as the trend spreads, we may see the labor market respond, with employers lowering entry-level salaries even further as they take into account insurance payouts. Indeed, like many aspects of higher education today, it feels like a race to the bottom.
Comparisons between insurance products and other forms of income or employment assurances are difficult to make. Should families prioritize colleges with strong outcomes (e.g., graduation rates upward of 70 percent and reassuring post-graduation employment statistics), robust alumni networks, or loan and insurance programs? It is also too early to tell what the consequences of transferring the risk to third parties, a common higher education risk management strategy, might be for students and institutions in the long term. And, it further financializes education, such that in the process of character formation, managing risk, rather than other values or logics, becomes central to identity.
Colleges and universities might want to ask themselves whether treating college degrees as a risk serves their long-term interests. Loan and degree insurance products may deliver short-term enrollment gains, ease families’ anxieties, and even encourage students to pursue majors often viewed as less “marketable.” In the long-term, however, these strategies relieve the pressure to address underlying structural challenges such as rising costs, stagnant wages and a flawed loan system. Ultimately, they undermine our ability to make the case for higher education as a public good, thus putting the future of the entire endeavor at risk.
Margarita Rayzberg is an assistant professor of sociology and criminology at Valparaiso University.
