Unlike previous generations, today’s students view college as an investment.
They often choose the school or program that presents the highest likelihood of a strong salary after graduation. One San Francisco-based college is particularly confident in its students’ post-graduate success, and has a rather unorthodox way of showing it: The college literally does not get paid until its students have secured well-paying jobs. It’s called income sharing, and yes, it really works.
In today’s episode, we’ll cover:
- What income sharing means and how it is implemented
- What is stopping traditional institutions from using similar payment models
- What the success of income sharing means for the future of education
This week, I spoke to Jeremy Rossman, co-founder of The Make School. As a young computer science student, Jeremy quickly learned that app developers were making the real money. When he got to MIT, however, he found no app development classes in sight. Jeremy therefore became an app developer on his own, and since no one else was teaching it, he started a summer app program in Silicon Valley. That program would evolve into the Make School, the first institution in recent memory to use income sharing for long-form academic programs.
What is Income Sharing and How Does It Work?
The concept of income sharing has been around since the 1970s. In some countries, college graduates are able to use income sharing to pay back their student loans. But no one had brought it to the US education space before the Make School. The computer science college has been using income sharing since 2014, when it officially became an alternative to a traditional institution. At that time, income sharing was so unheard of that the Make School’s founders had to draft their own agreements because they couldn’t find a lawyer who was familiar with it.
Here’s how it works: Make School students do not have to pay a dime of their own tuition (room, board, etc.) until they get a job that pays at least $5,000 per month ($60,000 per year). The Make School then takes 20% of the former student’s pre-tax salary for five years. That comes out to approximately one year’s worth of the former student’s five-year salary. If the former student stops earning at least $5,000 per month, the deductions stop. There’s no interest or late penalties, so the college makes no money if the former student is not reaching that monthly threshold.
Why Do Other Schools Balk At This Brilliant Idea?
Out of all Make School students who achieve Bachelor’s degrees, 90% get full-time jobs shortly after graduation. The average salary of a former Make School student is reportedly over $100,000. Critics say that this is just because the school focuses on computer science, but Jeremy disagrees. He believes income sharing could work for numerous programs, like nursing, education, or journalism.
So, why haven’t other schools even thought about implementing it?
Jeremy says it’s primarily because schools aren’t willing to begin the daunting endeavor of re-examining their cost structure. If they did, they’d find that much of their investments go towards frivolous things that are not tied to student success. And once the school determines it cannot afford income sharing, it must then ask itself: Why aren’t our students making decent salaries after graduation? As you can see, this problem has quite a few layers.
How The Make School Found Its Ideal Student
The Make School’s growth is also attributed to its unique marketing approach. In the past, the school strived to obtain as many applications as possible by shortening its local funnel. Their data, however, showed that their ideal students need more information before applying. The Make School now focuses on supplying plenty of information at the top of the funnel, and has even lengthened its application.
In the coming years, the Make School plans to build schools in new cities and expand its on-campus facilities. Despite the increasing popularity of online learning, Jeremy doesn’t expect the on-campus experience to lose relevance anytime soon. In fact, a myriad of Make School courses emphasize the value of person-to-person collaboration, since it’s undeniably essential for post-graduate success.
Schools Must Prove They Are A Worthwhile Investment
What Jeremy does expect is a heightened awareness of financially-unsafe programs. More and more students are adapting the aforementioned investment perspective. Education marketers must take note and prove to prospective students that their programs are indeed worth the cost. It’s time for institutions to think about why certain programs are now known as a luxury, instead of a necessity.