My College Corner talks with John Fees, Co-Founder and CEO of GradGuard. We love talking to innovators who are finding new and inventive ways to help families save, plan, and pay for college. And GradGuard has a really cool, interesting twist to bring innovation to protect students from the risks of college life.
To see the full interview:
John Hupalo: What we’ve learned over the years is sometimes innovation is actually in plain sight. It really means just rethinking some older concepts or some other products that are out there and reshaping them to meet some current needs. Today, we’re going to talk about one of those old industries: the insurance industry. My guest, a friend of mine for a long time, is the Co-Founder and CEO of GradGuard, John Fees. John, welcome to My College Corner.
John Fees: Thanks, John. I appreciate the opportunity and what a great introduction. Yeah, insurance is an old industry, that’s for sure. And I’m just happy to have an opportunity to visit with you about innovation around paying for college. When you and I were in school, I think I paid $450 for Arizona State University back in the 80s. Frankly, the risk of paying for college was pretty low. But today, the biggest change and why insurance is necessary is that the risk is high. And primarily it’s due to the financial cost.
JH: That’s really interesting. You know, John, my good friend AI provided me a piece of wisdom. I said insurance is old. Do you know how old it is? Do you have any idea what’s the first-ever written insurance policy according to AI?
JF: Oh, I have no idea. It’s probably a thousand years. It all started with shipping.
JH: Yeah, it all started with shipping in 1347. So you were really spot on there, 678 years ago in Italy. The first insurance policy was written in the United States in 1897. But what I’d love for you to tell us – and I love genesis stories above all – you are out there trying to protect students from the risks of college life. That’s big, it’s bold, it’s innovative. Tell us what brought you to try to solve this problem for students.
JF: Well, you and I came out of a student financing background, so we understood a lot of the ways American education has kind of gotten to this point. The cost of college is one driver that really changed the formula and the risk and where risk is being taken. But the real issue is that students’ lives have changed. When we went to college and lived in dorms, we had vinyl records. We had no electronics. We didn’t have things that were essential to our well-being relative to like a computer being able to help you do all your work. We actually kind of just peeled back a lot of the types of risks that college students face. And part of it is, I’ve got five kids. I have three in college, two graduated already. I’ve got two more to go. And what you realized is that paying for college is one of the most opaque decisions you ever make. It’s very unclear what result you’re going to get. We’ve kind of misguided Americans to thinking that all college degrees are worth the same, because we want to believe that it’s as worthy to study art as it is engineering.
But we’ve told people it’s worth the same. And the reality is, because we price the loans the same way, we price the education the same way, in fact. And so insurance is a remedy. It’s not the only one. But what I would say is I started GradGuard because we saw a problem to solve. And the biggest problem we saw is that basically the students who defaulted on student loans were those that didn’t graduate. 80% of students that did not graduate have the potential of defaulting. We don’t really have a student loan problem in this country the way the media describes it, because if you graduate, you’re going to increase your capacity to earn to repay those loans. The real problem is what gets in the way of being able to graduate. And we peeled back the underwriting on that, and health is one of the number one reasons. Actually, capacity to pay, something goes wrong in a family’s life. The death of a parent. A job loss of a parent. Paying for college is one of the big ones.
You would think maybe academic readiness would be right there as well, as one of the top three. But the third really is health-related issues. And when you think about the types of health issues that students face: first time living away from home, mental health issues of this generation are different than any before, but also this generation of students is more medicated than any generation previously.
JH: Wow, that’s interesting. And that has fundamentally changed in the last 15 years, hasn’t it?
JF: It absolutely has. Mental health is one of the number one reasons we end up paying for claims. But I will say it’s the number one reason why students leave school. One of the remedies, though, is to give yourself a do-over. When your son or daughter calls and says I can’t go on, you’ve got 2 problems. You’ve got a financial loss, but you have a student in distress. And I’ve been there with my own students. Your first and primary concern is their well-being. Your second one is the financial consequence. And what we want to do is take away the financial consequence.
We want to give students a do-over and their parents a do-over. So the money they saved in a 529 plan, the money that they’ve invested in college is protected. And so tuition insurance is that remedy. We’re the only company in the country that provides 100% refunds for students for any legitimate reason they may leave. And that includes issues like addiction. Issues like a concussion or an illness, physical or mental, the loss of a job of an employer, involuntary job loss. And ultimately we just want to give students the confidence that their investment in education is worth it. That if something unexpected happens that they’ll be able to recover from that and get a do-over.
JH: John, tell me concretely, because sometimes I’m a visual thinker. If I’m lucky enough, fortunate enough to go to one of your schools, and there’s 600 of them or so in your network now. So I go to one of your schools, I sign up, and it looks really good. I’m going to sign on the dotted line. What are you actually covering for me? Let’s say my tuition is $30,000.
JF: It’s the worst named-product ever because it’s more than tuition insurance. We cover the cost of education. So we cover housing, academic fees, and tuition. And the truth is, many schools will give you a partial refund through Week 5 of tuition. But they almost never refund housing, and they virtually never refund academic fees. The only things we don’t pay for are things that you’ve used – a partially-used meal plan, an insurance policy like student health insurance, where you have to buy that. We don’t cover health insurance because you still have that coverage. You haven’t encountered a loss.
The only requirement really is that you and a physician or a mental health licensed professional in their state have to agree that it’s in your best interest to withdraw from school and you need a complete withdrawal. So you cannot earn credits for that semester. And if you complete a withdrawal, our insurance partner, Allianz, which is the largest travel insurance provider in the world, largest insurance company in the world, then makes that payment and provides the refund.
JH: Well, that’s really spectacular, quite honestly. Is there a deductible?
JF: No, no deductible. I feel so good about that. We’re kind of an overnight success. Bill Suneson and I have been doing this for 15 years. We insure more students than anybody in the country. This is the best thing that shouldn’t be necessary, but because of the high cost of college, it is necessary. And I would recommend don’t go to college without knowing, most importantly, what is the refund policy of your school. If you can’t afford the cost of an extra semester, then make certain you ask for tuition insurance. Ask for GradGuard.
Now the truth is there’s still 600 schools that don’t work with us. If you go to UC Berkeley or Harvard or NYU or Georgetown or GW, they work with us, and I feel good about it. Go to YouTube and see the happy customers. I don’t really want to be selling insurance, but I’ll tell you one of the things I feel best about is we pay more than 90% of our claims. So there are no gotchas with this. This has to work the way it’s promised to work.
JH: So if I’m going to NYU, what’s the ballpark of what I’m going to have to pay to get your insurance?
JF: So just like I’m paying for a cruise, everybody pays a different price. At NYU, everybody pays a different price. A lot of your tools and services you provide to your constituents are helping people have transparency about what the net cost of college is. The truth is everybody needs a little bit different amount of tuition insurance.
The way to look at it is it’s $120 for $10,000 of coverage. So if you only need $10,000 because that’s your net cost, it’s $120. If you need $30,000, it’s $360. It’s a rate 1.2% times the amount you need. The key is you have to buy it before school starts. It’s just like you can’t buy insurance when your house is on fire. But the other key is that when the school offers it, it’s 50% less than on a retail basis. You can buy it on GradGuard.com, but it’s only 1.2% when schools participate with us and give every student the opportunity to protect themselves.
JH: I see. I was always wondering, sort of in the secret sauce, how you can make that work. And you said two things that I think are ultra important. One is transparency. So you take it, leave it. You just laid it out very clearly. I can go to the website, or I can go to the school and I know what it’s going to be. The other thing is that you talked about how you got involved in large part like I got involved because my kids were going into the college process. And I said, much like you said, we’ve been involved in college finance forever. And then my girls got there and I felt like a deer in the headlights. I was like, how could that be? What’s gone on here? And we saw different problems that we wanted to get after. But I think what you’re doing with insurance is just absolutely terrific. So it can be a short interview because there’s total transparency. You want to know the price? They just found out. If you want to know what’s covered, it’s all right there.
JF: I like to say I’m not an insurance guy, I’m a parent. I saw a problem and we’re trying to solve it. But I will say, but for GradGuard, there’s no way to do this because the challenge with insurance is that you need large rules of risk. You need schools from UCLA to Berkeley. So we covered COVID. We’re the only insurance company that covered COVID for tuition insurance. So if a student got sick and they needed to leave, we covered it and that’s the way insurance should work.
I feel like with these fires, these horrible fires in California, the floods in North Carolina, the issues in Florida every year, that some insurance doesn’t seem to be working very well for families. What I’ll tell you is I’m very much committed to having a policy that’s transparent, that solves a problem, and delivers what is promised. And that’s what GradGuard is all about. The truth is the risk of paying for college is borne by taxpayers and families and students right now. And one of the challenges I think we’re going to see is this alignment around outcomes for schools.
So schools that are committed to college completion are really, really important. Schools that are committed to transparency, telling you what the refund policy the schools are. Schools are obligated by the CFPB (Consumer Financial Protection Bureau) to tell you what the refund policy is just like any other consumer purchase. But most don’t. And it’s not because they’re dishonest. It’s just because their tradition has never been to highlight that. And the only other thing I would say that’s important to say is within the industry, within higher education, we all like to talk about 75% persistence rate. That’s what the National Clearinghouse will say is 75% of students that started at a four-year non-profit institution returned for their second year. That sounds like a great number, unless you’re in the 25%, the one in four students who paid for college and didn’t return. Those students feel dissatisfied. Those families suffered a loss really because that student may not persist. And frankly, if you spend a lot of money that way, it’s bad for your students’ and young people’s identity to spend all this time and effort to select a school to then not have the resilience or to have something interrupt that journey.
JH: Well particularly, as you said many times, the non-completion is caused by some traumatic event – a loss of a job, an illness, whatever it might be. It’s not just they got up one day and said, I want to go home. That’s just not like what happens, right?
JF: National Clearinghouse data said in 2023 that 113,000 students left school prematurely due to medical reasons. At an average of $16-$17,000, which is low, that’s $2 billion of financial losses. And it doesn’t need to be that way. If every school will work with GradGuard and families know about it, I’m not saying everybody has to buy it, but it’s a smart purchase.
JH: Yeah, you just need to know it’s an option. I think about when I thought I was going to be really smart and kill my glass coverage on my car and don’t you know the next week my window got broken. What was I thinking about? For what was really just a few cents on the dollar.
JF: One other thing I would just say is that, because we talk about money to families all the time, GradGuard also provides renter’s insurance to university students. And again, you say, well, renter’s insurance, don’t I have homeowner’s insurance? Yes you do. But home insurance has a lot of limitations when it comes to students living on campus. We designed a program that is embedded in about one-third of the universities in the country. So if you live at UCLA or Berkeley, or American University or a variety of schools, you’re told the university is not going to replace your stolen or damaged property. But GradGuard will for $12 a month. And the point is not to be a direct consumer play, but to basically help that student when their backpack gets stolen or their bike gets stolen. And that is guaranteed to happen to either your student or your student’s friends. And just for some data, the Clery Act reports that on average there’s 2,000 fires on college dorms every year. And those fires, again, when we didn’t have electronics, didn’t matter. But today they do. Renter’s insurance is a no-brainer. It’s absolutely a valuable thing because you never want to file a claim on your homeowner’s policy. You’ll either get cancelled or your rates will go up. And it’s certainly not worth it to replace a bike or a backpack.
JH: Yeah, again, renter’s, unlike tuition insurance, is a little more intuitive because lots of people have dealt with renter’s insurance. So intuitively you kind of get that. But what you don’t get is the idea that with you it’s kind of one-and-done. I insure myself. I can figure it out next year. I don’t have to worry about what’s going to happen if I file a claim. It’s very simple. It’s neat. It’s clean and you pay.
JF: That’s the interesting thing is we really want to pay claims. We want to make certain students are happy. When we work with 600 universities, we’ve got to make certain that students and families are happy because we work on behalf of the schools, so it really helps.
JH: There was one other thing on the website that I want to ask you about, and maybe you just covered it, but it’s student life assistance. That’s a big point there. What is that?
JF: The student life assistance is embedded in our tuition insurance product. Say you have a student away at Seattle University. I live in Phoenix. When your student needs to come home, say they’ve got a concussion and can’t complete the semester, you’re more than likely going to have other issues you need to deal with. You’ve got to pack up the dorm room. You might have a car on campus. Student life assistance doesn’t pay for those things, but it will coordinate those things. So it will help you identify the mover and to pick up the car to get it moved back to Phoenix. It will send somebody to go pack up everything in your dorm room to get it moved back. When you have a student in crisis, money is the last issue you’re thinking of. But, by the way, you’ve got to get their property back home too. So really the idea is to basically be a concierge to help you with that moment in time when all of a sudden, how am I going to deal with this?
JH: Yeah, because most of us rely on our friends and hopefully our friends didn’t go through this. There’s no one really to turn to and say what did you do when this happened to you? So if I know that I can turn to a professional and say, okay, here are the five things you need to do, or eight things, and I’m probably smart enough to figure out two-thirds of them. But there’s going to be that little piece there. Just knowing that somebody is looking over your shoulder has to be a huge relief for parents that are dealing with a crisis with their loved one, their kid who’s going to now come home from college, which was not in the plan.
JF: But we’re here for it and we’re here to help them get back on track. So, at the end of the day, our goal is to help students re-enroll and 75% of the people we pay claims to re-enroll in college. The key to me is there might be other reasons why that student can’t re-enroll, but we really want to help them get back on track.
JH: That’s really great. Did we miss anything? You covered a lot of ground in a short time. Is there anything else we should talk about?
JF: Come see me in Phoenix, John. It’d be good to have you out here. And really, to all families, this is a great journey. Education is absolutely worth it. But you have to be a consumer. And just like any other consumer purchase, you’ve got to look at this carefully and with real concern to the potential financial risk to your family as well.
JH: Yeah, as I said it three times now, it is spectacular. And GradGuard is perfectly named because you’re guarding my grad, and you’re gonna help me, if I get off the track, you’re gonna help get me back on the track.
Well, I’ll wrap up this edition of My College Corner’s “Ask the Expert” with today’s guest, John Fees, Co_Founder and Chief Executive Officer of GradGuard. For more free great content to help you figure out how to save, plan, and pay for college, follow My College Corner on LinkedIn and Facebook, and subscribe to our YouTube channel.