With New Promise by Udacity, Money-Back Guarantees Come to Online Courses (CHE)

With New Promise by Udacity, Money-Back Guarantees Come to Online Courses (CHE)

JANUARY 13, 2016
Late-night infomercials aren’t the only venue where companies try to lure consumers with money-back guarantees. Now some upstart online-education providers are making the same promise.

Udacity, a Silicon Valley-backed provider of MOOCs, announced on Wednesday a new program that guarantees its graduates will land a job in their field within six months of completing the program — or their money back.

But there are plenty of caveats.

The promise is being offered only to students who enroll in Udacity programs that teach the most marketable skills: machine-learning engineer, Android developer, iOS developer, and senior web developer. And students must complete the courses, something a vast majority of the four million students enrolled by Udacity do not accomplish.

Students who want the money-back guarantee must also pay an extra $100 a month for that piece of mind, remitting a total of $299 a month until they finish the course. For most students, it takes six to eight months of working 10 hours a week to complete a program, said Udacity’s chief executive, Sebastian Thrun, in an interview this week.

There is also no guaranteed benchmark salary, although Mr. Thrun said the positions are “real” jobs — “not jobs as a Starbucks barista.”

Some in traditional higher education say that such claims seem cheap or even desperate. But as more upstart education providers offer targeted programs and put more effort into finding jobs for their graduates, could such promises eventually become more common?

Recognizing Risk

For Beth Akers, a fellow at the Brookings Institution, guarantees like Udacity’s are a market solution to temper the risk that students face when they choose to invest in higher education.

“They recognize that risk is something their students, the consumers, are concerned about,” Ms. Akers said. “They are able to take on some of the risk for students, and make it an easier and safer bet for those that enroll at that school.”

Ms. Akers sees the guarantee as an innovation stemming from the need to reduce financial risk in higher education. She likens the offer to universities that guarantee graduation within four years. Colleges that make such a pledge typically offer students who don’t finish in that time span discounted or free tuition for courses they take after that.

Adrian College’s president, Jeffrey R. Docking, called Udacity’s money-back guarantee a gimmick that couldn’t be supported at an institution like his. “It’s not an option that we would entertain either philosophically or economically,” he said. “It’s not feasible.”

But the Michigan college has made unusual efforts to address concerns among students about the rising cost of attendance. Adrian recently began a program, Adrian Plus, that will repay a student’s loans if he or she doesn’t find a job after graduation, or if the job pays less than $37,000 a year. Adrian Plus is available to all new freshmen who have enrolled since 2014.

While elite universities don’t advertise official guarantees and don’t see job training as the core of their mission, Robert Sopko, of Case Western Reserve University, said that their strong reputations mean that there is a high likelihood graduates will land jobs.

Mr. Sopko, director of Case Western’s LaunchNet program, which supports entrepreneurship, said that while it is unlikely any college could ever make an across-the-board guarantee, such promises could work for specialized programs in high demand.

A ‘Crisper’ Way

Mr. Thrun defended the Udacity guarantee as a “crisper” way for his institution to persuade students to attend. “Certainly we would like to get more students and increase enrollment. That’s absolutely correct, and we will deliver our promise,” he said. “If other colleges have other philosophies, that’s perfectly fine with me.”

But Mr. Thrun said he hopes other colleges catch on. “I would recommend every college president to think about this,” he said.

Udacity isn’t the first upstart to offer a money-back guarantee. At least one so-called coding boot camp, the Flatiron School, guarantees students in one program a job within 120 days of graduation.

The program prepares students only for specialized jobs such as software engineers, full-stack developers, or front- or back-end developers. Jackie Morgan, manager of student development and job placements at the Flatiron School, said the program is job-driven from start to finish, and is designed for successful people looking to change careers.

“What we do is provide a specific training for a specific skill set with the intention of getting a job at the end,” she said. It helps, too, that the school accepts only about 6 percent of applicants.