Five startups that will change higher ed
It’s no secret that the costs of higher education are rising unsustainably—and with it, student debt. Higher ed should not cost an arm and a leg.
Here is a chart on the cost of college since 1981:
Tuition, fees, room and board have increased 2–3x in 35 years, after removing the impact of inflation. There is an excellent 10-part series on the Washington Post that explains why, aptly titled “The Tuition is Too Damn High.”
Today, there is a total of $1.4 trillion in student debt in the US. 70% of college students graduate with debt. The average Class of 2016 graduate has $37,172 in debt. Based on an average monthly payment of $351, the average debt takes roughly 12 years (!!) to pay off. Now square that with the fact that 63% of Americans can’t come up with $500 for an emergency.
But that’s not all. The wages of young college grads have been falling since 2000:
One in 10 young college graduates is neither employed nor pursuing more education, and even more are underemployed:
It’s not a pretty picture.
What doesn’t make sense is the fact that a quality education requires such a concentrated investment at a time in life that the student is least able to pay.
The rapid rise of student loan financing startups (e.g., SoFi, CommonBond, Raise.me, Climb Credit, to name a few) signal the overwhelming demand to shift the cost to later in life when the student has more ability to pay. However, as the loan principal balloons, so does the economic burden—which often lasts for over a decade. Student loan financing is only a band-aid to the bigger problem.
The learning to employment pathway is really hard. We need to come up with different models of higher education that do not lead to high indebtedness which limits options down the road.
Here I profile five startups offering fresh ideas. We need more models like these to shape the future of higher ed.
Minerva: the low CapEx university
The Minerva Schools at KGI, a four-year private non-profit accredited college, managed to reduce its tuition costs to just $12,500 per year. Adding housing and student services brings the total to $24,450, which is half of that of the average private institution. They achieved this feat by being hyper-focused on teaching well and cutting out all the excesses. Reducing the CapEx required, Minerva does not operate gyms, libraries, cafeterias, nor classrooms, but instead leverages the infrastructure in the surrounding city to fill its needs. Minerva’s faculty do not have tenure and do not conduct research. There is no administrative excess either.
WaPo identified a key reason for the skyrocketing cost of higher education to be the constant race to build beautiful campus facilities, which also are expensive to maintain. Ironically, institutions build them in order to attract the wealthy parents, but unfortunately the cost gets spread between everyone that attends, rich or poor.
By only focusing on what matters for student learning, Minerva is able to create a quality college experience at a fraction of the cost. In addition, they offer need-based financial aid and work study to further improve affordability.
Make School’s Product College: payment that works for you
The Make School’s Product College innovates on two different aspects: shortening higher ed and bundling with an innovative, income-based loan product. Product College is a two-year program to train founders and developers, with a curriculum focused on making technology products. Students can choose to pay full tuition upfront ($30,000 a year) or $0 upfront and 25% of salary for 3.5 years after graduation, with a sliding scale of options in between. The shortened timeline (two years instead of the traditional four) and the focused curriculum designed to propel students into the real world to solve problems with technology (instead of a meandering liberal arts education) set up students with a straightforward path that should see higher rates of success.
From the perspectives of the loan underwriter, they are expecting an IRR of 25% (based on the target scenario shown on the website), which is much higher than the 4–6% on typical student loans and therefore should mitigate the risks. A student six years after they start Product College, compared to their peers that started at traditional four-year private universities, should have a more sound financial profile with no debt and a solid salary.
Revature: the coding bootcamp that pays you to learn
Revature goes one step further: no debt, only upside. Unlike most of the other coding bootcamps, this bootcamp in Virginia does not ask students to shell out tens of thousands of dollars from the start; it pays students a living stipend and offers accommodations while they are in its 12-week program and after they complete the program, they work at Revature for two years for entry-level wages as contract developers for companies across the country.
Why is this a great idea? Coding bootcamps today are heavily criticized for not producing high caliber candidates; unsurprisingly, it takes longer than 12 weeks and diversified work experiences to be a good developer. Even though almost every startup needs to hire engineers, they are likely waiting for senior engineers and passing over the junior developers that have recently graduated from bootcamps. Revature’s graduates enter the workforce with two years of software development experience under their belt and plenty of projects for real companies to boot. They should have brighter prospects. Plus, they have been earning money all along. This is how training in the apprenticeship model should be.
Recurse Center: the learning community that gets you hired
The Recurse Center changes the paradigm of higher education from an institution where you’re taught a curriculum to a “community of practice.” Formerly called the Hacker School, this NYC outpost is a 6- or 12-week program, with no teachers or curricula, where students come because they want to take time off and improve their craft among likeminded peers. The program is free and even offers a need-based living stipend. It makes money when companies hire from its students, as companies are accustomed to paying recruiting fees for engineering talent anyway.
RC is selective and designed for those who already know how to program, catering to those who cared enough about their craft to take the time to improve it (read: the more experienced, more valuable developers), so their students should be pretty attractive to companies and recruiters. RC is promoting excellent learning: to be able to make something is to demonstrate the highest level of mastery, and students at RC are empowered to improve their craft and use it to make something.
Makerspaces: the playground for learning
Makerspaces for kids are all the rage right now and they are cropping up everywhere. Parents that used to take their kids to the Museum of Science now take them to the local Makerspace, enroll them in Minecraft classes and avail to them a plethora of Maker toys to play with. These toys strike a compelling value proposition in that they are engaging and addictive but also every bit educational. Getting a hands on education in STEM has never been so easy.
Adult Makerspaces are also around but have attracted less attention. They are communal spaces equipped with tools for making. When I visited the Artisan’s Asylum in Somerville, on the outskirts of Boston, it was a sprawling 40,000 sqft facility encompassing woodworking, metalworking, 3D printing, and many other sections. Artists, musicians, bike hobbyists, and creators of all kinds rent cubicles as their studios and machine time to work. They contribute to the community by running workshops and showcasing their passions with fellow makers.
Today, these Makerspaces are mainly for hobbyists and self-employed creators that would sell their creations at places like Etsy. But they are actually great communities for learning and creating and I hope that learning communities like these can move into the mainstream.
From structured programs (Minerva Project and Reventure) to open-ended learning environments (Makerspaces and Recurse Center), higher ed programs don’t have to look the same, cost a fortune, and be at only one, concentrated, point in your life.
There should be plenty of paths to employment and fruitful productive pursuits that support each individual’s goals and circumstances. The future of learning should not be confined to the walls of a campus; it should be on-demand, fit every type of budget, and be easily integrated into our lives. We need more models like these to shape the future of higher ed.
✌ I am an early stage investor at Upfront Ventures. I am passionate about the intersection of improving human potential and big, transformative businesses. If you care about the same things, drop me a line at chang@upfront.com.
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