[kevintxwu]

I think that you have some good points here that we've actually debated internally quite a bit. First, I would say the program is designed so that we commit a specific amount of time and resources per student, so we're motivated to work on their behalf to recover that investment that we make for free.

As for the risk of trying to sell quickly rather than looking for quality, I think the most effective way we can tackle it is by also measuring the student's satisfaction with their final offer.

One of the most important things to protect a student here as well is they don't have to accept any offer they're not happy with. They can reject an offer to look for more and we don't have any say to stop them.

Whenever we do run into a situation like this where our advice may be affected by a conflict of interest, we also do our best to inform the student first. Something like, "Pathrise will make money if you accept this offer, so please take what I say with a grain of salt, but..." and then we'll just have an honest conversation about what they're looking for and if the offer is a fit.

[treis]

Committing a specific amount of time gives you an incentive to better screen your applicants. It still doesn't give you an incentive to find them the highest offer. Let's say that someone could get 110k with a significant effort by your company and 100k without you.

You guys doing very little gets you 7k.

You guys putting forth significant effort gets you 7.7k.

That's not much difference and it makes a lot more sense for you to put that extra effort into finding another customer to get another 7k.

[kevintxwu]

Hmmmm, this is a really interesting line of logic.

With this logic, I think you can look at the income share agreement more as us taking on the risk rather than aligned incentives.

The problem with some potentially good career coaching services out there is that charging students thousands of dollars upfront without actually having placed them yet just feels unfair.

On the other hand, with income sharing, students know we have a similar risk of getting nothing out of the experience as they do, which motivates us to make their experience as impactful as possible.

Even if we continue at an extremely high rate of placements, let's say 95%+, for the other 5% of students where the worst case happens, the income share agreement model is much better than upfront payment because the cost of these invested advising hours and resources is on us rather than on the student.

Outside of that, I think from a purely revenue perspective you're basically right that the incentive to invest a lot of time for a little salary is not incentivized.

Part of the reason why we are still incentivized to put effort into our students (especially if we can track measurable results) is that those results will ultimately lead to much better user acquisition anyways, especially since we expect natural referrals for Pathrise to be one of our main sources of growth moving forward.

I do have to admit though, that though this is a very real incentive core to our business, it isn't an incentive that's actually integrated into the revenue model itself.

[ISL]

Students are generally informed in writing about the impacts of student loans, but they sometimes regard loan providers as predatory once the loans come due.

There is a chance here for both the student and Pathrise to benefit from working together, but the social interaction (and understanding that students sometimes make life-choices that they later regret) must be navigated with a deft touch.

An up-front payment for Pathrise's services, assuming that they work, would appear to avoid any future sadness; the student could finance the interaction with an outside financier. Coupling the financing directly to the service may cast an unwarranted shadow upon an effective job-placement service.

[kevintxwu]

Yea, we definitely have to be sensitive about offering financing options directly to students.

One of the ways we handle this now is we actually ask the students to consult their family before signing anything. We also allow the students to still drop out of the program at no liability within the first two weeks.

The problem with upfront payment is that we are no longer held accountable by aligned incentives. The most predatory thing about student loans is that you still owe the same amount of money regardless of your outcome. I think our income share agreement is designed to be much safer since in almost every case where you pay anything you are also capable of paying it.

For students in exceptional situations, we'll even waive their dues or retro-actively offer financial aid since we didn't design the program to be a future burden. The way we see it, helping out a student in need in any way pays back tenfold in terms of reputation later.

[jabv]

As an aside, I don't think "the most predatory thing" about student loans is the fixed cost regardless of profit. The same could be said of any business or real estate loan. The most predatory thing about student loans is that there's barely any rational qualification of the loan recipient.

[kevintxwu]

Yea, you're right. I would say it's in part the disparity between the scale of the fixed cost and the amount of qualification that is predatory.

As in, if it was a loan for only $1000, it's certainly more ok to do less qualification. Versus if you were saddling a student with a loan of $40,000, you should probably be very careful.