Degree Insurance, a startup located in the Kiln co-working space in Lehi, is on a path to disrupt two of the largest industries in the economy—higher education and insurance—with a fundamentally new insurance product guaranteeing people will make more money with a college degree than without one.

Higher Ed is in a different place than it has ever been before. Tuitions are sky high and increasing faster than inflation. The huge investment in higher education is daunting for many. However, for most people a university education is still a reliable investment. Founded by Wade Eyerly and Dennis Murashko, Degree Insurance wants to make college even more reliable. Students attending a college that has adopted the Degree Insurance product will be covered for five years, essentially guaranteeing that they will make more money with a college degree than without one.

Eyerly previously founded an airline startup, California-based Surf Air, giving him experience and confidence in taking on a big, entrenched industry. While involved with SurfAir, Eyerly was moved by a friend's situation, a pilot with a back injury who couldn't continue flying after investing a quarter million dollars into his career.

The pilot’s misfortune motivated Eyerly to create a solution for people who invest a lot into higher education and yet are not guaranteed the investment will pan out in the end. “College degrees are the only thing for which you counsel someone you love to borrow ten times their net worth and make a single investment hoping it will work out,” says Eyerly. “But it does work out very reliably 90% of the time,” he admits. “However, the thing that determines if it works out is not obvious, like going to a good school, getting good grades, studying under good professors, and publishing. Those things matter, but they are actually marginally important relative to the state of the macro economy that you graduate into. If you graduate in 2009, it doesn’t matter what you studied or where.”

Eyerly sees higher education like spinning a roulette wheel where nine out of ten slots are the same color. “If the right color doesn’t come up, the right answer is to spin again, and that’s what the wealthy do.” says Eyerly. “If they graduate and there are no jobs available, they just go to grad school, or hide out for two or three years in a socially acceptable way, and then try to re-emerge into a different economy. But if you’re an under-represented minority, a first-generation American, or otherwise poor, you don’t have the option to hide out. You anchor your market rate at a low point, the economy rebounds and you see your salary grow at a 3% annual wage increase if you’re lucky. You end up servicing your student loans for 20+ years—not an ideal situation.”

In 2017, Eyerly and Murashko founded Degree Insurance to create a new category of insurance covering college degrees. The company must first obtain state approvals for their new product, as all states have their own regulations governing insurance and higher education. In August, the company received its first approval from Illinois, a state not known for low regulation but one with a strong commissioner-driven insurance regulatory process.

The company recently raised $4 million from Trust Ventures of Austin TX, a VC firm specializing in heavily regulated industries such as airlines and higher education. The investment provides the company with enough funds to satisfy state regulatory reserve requirements and gives it fuel to pursue other states. With its first state approval—always the hardest—the Degree Insurance is seeking regulatory approval other states. It expects to be approved to sell to a dozen states by the end of Q1 2021.

“With Wade and Dennis, you are getting the dream team for addressing a big, entrenched industry," says Trust Ventures Founder and General Manager, Salen Churi. 

“Wade is a big thinker. He is someone who is driven by tremendous passion. Once he gets fixated on a problem, there is really no stopping him. He is one of those founders who will run through walls to get something done. Dennis is a unique counterpoint who comes with deep skill sets that are absolutely essential to successfully execute on Wade’s vision. Both as an actuary and elite lawyer, Dennis has a unique set of capabilities to complement Wade’s experience and getting the product through regulatory approvals. Getting their first regulatory approval in Illinois is a testament to their boldness and perseverance, but also the technical sophistication that these guys can bring to solving this very big, very difficult problem.”

Churi is confident that the team will be able to execute well and provide a compelling value proposition for high schoolers heading off to college. “If you are in high school thinking about college, you are not really sure what you are signing up for.” said Churi. “The one thing that is guaranteed is how much you are going to pay; what is not guaranteed is how much you are going get paid because of that degree.” This is the problem that Wade and Dennis are attempting to correct. “We are excited about investing in them because they are removing the uncertainty out of the biggest purchase people are likely to make outside of a home.” says Churi. 

Degree Insurance is turning the investment in a college degree into something that looks similar to other investments in financial markets. The company offers consumers clarifying data of what the degree is actually worth from an investment perspective. “It puts students in a position to know more about what college will do for them so that they can focus on self-actualizing and achieving their dreams but also giving them confidence that they are going to get what they paid for,” says Churi.

So how does it work?

Eyerly explains: “When students graduate from a client university, they send us their W2s and tax returns. If they don’t make what we insured them to make, we will cut them a check for the's that simple.”

Eyerly says the idea behind the product is essentially risk transference. He prices it to the median salary estimate, assuming half of the college graduates will out-earn the median and the other half will come in under. There is only one catch—you have to graduate to qualify. “We use insurance to guarantee the return on investment of graduating with a degree," says Eyerly. “If you graduate and don’t earn as much as we said you will over a five-year period, we will cut you a check for the difference. But you have to graduate.”

The real hope of the company is that their product will improve college graduation rates. "It is the single most important thing to fight unemployment," says Eyerly. “In the Great Recession, unemployment peaked at 10%. However, for college graduates it was half that—5%. The best thing you can do in an economic downturn is have a degree.”

Eyerly studies the work of Raj Chetty, a Harvard economist who runs Opportunity Insights. Chetty writes about two economies: the population with a college degree is experiencing no recession. "The population without a college degree is experiencing 20%'s wildly different,” Eyerly says, paraphrasing Chetty. “Anyone with a college degree is now working from home during COVID; anyone without one has been laid off.”

Eyerly and Murashko are confident that their new insurance product will transform the investment risk of higher education. They want to provide a new level of confidence for incoming freshman who enter college with high hopes for gainful employment afterwards.

The market for their product is enormous, according to Eyerly. “Education is the largest uninsured investment market on planet earth. And yet, it's the most expensive thing that most people buy in their lives that they don’t have insurance on. We have set out to create a win-win for people who, at a time in their lives not known for financial literacy, are signing up for the largest uninsured investment they will ever make.” says Eyerly. With Degree Insurance, Eyerly and Murashko want to remove that risk, while at the same time giving their colleges (their clients) an additional edge in recruiting. Ultimately, they intend to measurably increase college graduation rates nationwide.

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