Save HBCUs By Guaranteeing Earnings For Graduates

Save HBCUs By Guaranteeing Earnings For Graduates

Over 30 million Americans filed for unemployment since we locked the nation down in response to the COVID-19 pandemic. The economic impact of our response to this crisis is unprecedented. In the darkest moments of the Great Recession, only 1 in 10 American workers looking for work couldn’t find it. We’ve surpassed that mark in less than a month.

The scale of the current crisis is mind-boggling. But those overall numbers don’t tell the whole story, because not all American workers are the same. In the last recession, the unemployment rate for American Indians and Alaska Natives was 15%, for Latinx workers it reached 13%, and for African Americans it touched 17%.

The unemployment rate for college graduates, however, barely grazed 5%.

We know how to protect ourselves from unemployment in America – even in a downturn. One simply needs to hold a college degree. In response to the Great Recession, enrollment in America’s colleges boomed. 2007 US enrollment was a little more than 15 million students. By 2010 it was over 18 million. We doubled down on education and sprinted forward as a nation. African American enrollment took a greater slice of the pie, jumping from 9% of all college students to 14% and stayed there. Hispanic students’ share quickly leapt by 1/3. It’s now nearly double what it was before the recession. The most vulnerable among us saw the power of a college degree and sought them out.

But the current crisis is different. The coronavirus is attacking higher education finances head on, putting their long-term survival at risk.

The experience of a residential four-year college is quite different than even the best online-only or online-first institutions. Students pay an increasingly large tuition premium for the in-person experience. So, as colleges have been forced to shift their instruction online, many students have begun to reassess the value they are getting for their investment. 1 in 6 college students set to enroll in the fall are reportedly revisiting that decision. Students applying right now are questioning if colleges will be open in the fall, if the experience will be worth it, or if they should just wait a year or two. Students likely believe colleges will always be there. But that is far from clear.

Colleges’ revenue streams are upside down. Many students are skipping summer term this year. Some schools are deferring fall start to the winter of 2021. And fall enrollment at some schools will likely decline , now that students are unable to attend college fairs or visit campuses. And all of this stacks on top of dozens of colleges that have closed their doors in the last 3 years, with a 2019 study from E&Y listing 800 colleges as “at risk for financial closure.” 

Particularly at risk are America’s 101 Historically Black Colleges and Universities (HBCUs). HBCUs have served as a safe haven for talented students to seek out an education in an environment unencumbered by racism in a nation still struggling to address its historic inequalities. In the last 100 years, HBCUs have provided millions of disadvantaged Americans access to the American Dream, training doctors, lawyers, and engineers. HBCU-trained leaders return to those same disadvantaged communities and do much of the heavy lifting to help many in need escape the poverty trap. HBCUs are a critical piece of the higher education infrastructure in America that is the envy of the world. Yet, in the 6 years following the Great Recession enrollment at HBCUs fell 11% meaning many of them were already struggling financially. Those challenges are amplified in the post-COVID-19 world where 1 in 6 students are already reconsidering their plans for the fall. If we can't convince students to enroll this fall, we are at risk of losing these colleges altogether.

But with a little ingenuity and some fast action, we can save these critical institutions. We need to encourage prospective students to enroll this fall. We need to broadcast the importance of a college degree in combating the impacts of an economic downturn. And because a college degree represents such a large upfront investment in time and money, we need to give students the confidence that it will be worth it even if they're battling through pervasive changes in the way classes are taught and what the college experience looks like. We need to provide certainty in uncertain times. We can do that by guaranteeing the outcomes of graduates in the years following their graduation. For the last couple years we've been building an insurance product that would guarantee a graduate's earnings in the 5 years after they complete college. Our product is not yet in market, but we're working with regulators now and we're close.

We estimate that it would cost roughly $100M to guarantee the earnings of every new student enrolling at an HBCU this fall. Imagine being able to say that no matter what college looks like this fall if you'll take the leap and enroll, the college will guarantee your earnings when you graduate. Colleges could provide the confidence necessary to get students back to studying, and tuition dollars back to supporting those colleges. Sure, individual colleges could buy the insurance once we are licensed, but Congress could act on behalf of all HBCUs to give our most vulnerable students the security they need to pursue a degree - and they could do so now. Swift action will shore up the ladder that gives so many of our brightest Americans access to the American Dream. In doing so, we can begin to flatten the curve of unemployment that most directly impacts America’s minority populations. While guaranteeing earnings can certainly be broader than just HBCUs, let’s start by using our response to this crisis to help shape the America we want to live in and insure a bright future for all.

We'd love to know what you think of our concept - please let us know in the comments.

CEO Wade Eyerly and President Dennis Murashko co-founded Degree Insurance.

Jacqueline Mendez

Associate Director Of Recruitment at Liberty University College of Osteopathic Medicine

1y

I heard your conversation with Bill Bennett. Interesting concept you share with the audience. Are you finding colleges receptive to this idea? There are quite a few colleges who rate are below fifty percent. One question for you. Who backs the product? What costs are billed to the University? Is there a chart to review rates for schools to consider type of coverage to purchase?

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Chris Tyrrell

Institutional Digital Assets Compliance and Risk Management

3y

All it takes is a little bit of genius and a heaping of gumption. Fantastic idea, Wade. The ROI on "insuring" educational outcomes -- for what the data implies is the most employment-vulnerable population in America in this current crisis -- would be phenomenal. Tagging some key influencers who might be interested in helping figure this out, or at least spreading the word. Asahi Pompey Margaret Anadu Stephanie Smith Kimberly Bryant Nsenga Burton Clyde Anderson Annie Jean-Baptiste Earl Coleman Rodney Sampson Ruchika A. Shaunna D. Jones Jeremiah DeBerry Joy Schoffler Joe Mechlinski Chike Ukaegbu Brian Laung Aoaeh, CFA Daymond John Ayinde Alakoye Sidney Madison Prescott Darrick Rousseau Zaki Robbins

Love the concept, Wade Eyerly. Make it happen, Wade! You are a true disruptor and Degree Insurance is so needed now more than ever before!

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