A Novel Idea to Keep Students in College: Failure Insurance

Two finance experts, one from the Federal Reserve Bank of Philadelphia and a professor from Colgate University, proposed a new idea at the American Economic Association annual meeting last week in Atlanta for helping students persist with their educational goals: Failure insurance. While the authors offer no specifics about how such a plan would work, their paper titled, “Insuring College Failure Risk,” outlays the following precepts, according to Sunday’s The Chronicle of Higher Education article below:

“It is theoretically possible to create failure-insurance policies that would hit a sweet spot. That is, the insurance policies’ potential payoffs would not be so high that they would give students an incentive to shirk on their schoolwork, but would be high enough to make students more comfortable with staying in college and taking on more debt. Staying in college would allow some of them to develop better study skills and to put themselves on a path to graduation. Those decisions are shaped by students’ finances, their beliefs about their future earnings, and by the amount of misery—”disutility,” in econospeak—that they suffer when they do academic work.”

With the high cost of college, another more data-supported formula for “failure insurance” is to prepare students while they are in high school for the crucial freshmen year transition. I’ve designed LifeBound’s programs for this precise purpose: to help students make a successful leap from high school to college level work by addressing the issues and potential pitfalls that students encounter at every grade level, 9-12, starting with our freshmen success program called:

Making the Most of High School and Study Skills–two books and curriculum for the fall and spring semesters. To receive review copies of these materials, please call toll free 1.877.737.8510 or email contact@lifebound.com. In addition to the questions fielded by the authors featured in Sunday’s The Chronicle of Higher Education article, here are mine:

  • What can we do to ensure that student success and transition programs are instituted into middle school and high school curricula so that every students is put on the path to graduation for college, career and life success?
  • How can associations, such as the National Resource Center on the First Year Experience, utilize the expertise of high school success programs to help support their mission?
  • How can we better implement bridge programs at the college level to help every student succeed?


The Chronicle of Higher Education
January 10, 2010
A Novel Idea to Keep Students in College: Failure Insurance
By David Glenn

Imagine a first-generation college student whose high-school preparation was less than ideal. She has just finished her first semester, and she realizes now that college is going to be tougher than she had hoped. She failed one course and struggled to earn C’s in her other subjects. She worries that she’ll eventually flunk out, and she wonders whether she should walk away now before she accumulates any more student debt.

But what if she could hedge her risks by buying a “failure insurance” policy that would reimburse her for a portion of her student-loan debts if she did flunk out? Would that make her more willing to stay for another semester?

To view this entire article visit www.chronicle.com

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