Commission-Based Education Finance

Moneybox
A blog about business and economics.
March 22 2013 4:53 PM

App Academy's Commission-Based Education Finance Model

Every once in a while someone proposes the idea of replacing student loans with some form of equity finance, which sounds clever but then everyone gets creeped out because you can't sell people. Well it looks like a company called App Academy has taken the basic spirit of that idea and made it work in a helpfully non-creepy way that doesn't involve the sale of human beings.

What happens is you enroll in a 9-week, 90 hours a week boot camp style instructional course on computer programming. And you pay for it by paying a 15 percent commission on your first year of post-graduation salary. If you get a gig that pays $70,000 they get $10,500 for their trouble.

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It's a neat idea. Obviously it has a lot of limitations. There are ways students could game the system, and it really only works if the program is fairly selective. Lots of things people value about education are not amenable to 9-week cram sessions and there is worthwhile learning that takes place in life for non-pecuniary reasons. But don't think of this model as a replacement for all other forms of education. Think of it as something that should be out there. Coursework that's much too intense to be fun (most students want to have fun in college) and thus really has to be narrowly focused on economic goals. Training that's relatively rapid and thus can allow firms to meet labor market needs in something approaching real time. A model where the educators' mission is to find the most cost-effective way possible of providing credible training.

Seems promising.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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