Originally published: EdSurge | By Tony Wan | May 6, 2016
On April 18, the second round of applications were due for the U.S. Department of Education’s EQUIP pilot, which will offer federal aid to students who attend university programs created in partnership with third-party companies, such as coding bootcamps. The folks in Washington now have to clarify the tangled relationships and responsibilities between the parties involved in the experiment. There are at least four: the university, its accreditor, the alternative education provider, and a “quality assurance entity” (QAE) to monitor the program.
Rick O’Donnell, co-founder and CEO of Skills Fund, says his company is among the organizations listed as a QAE in applications sent by universities. But he’s not necessarily too eager—or enthused—about EQUIP. “It’s a well-intentioned but ill-conceived” program, he tells EdSurge.
His critique of the government’s experiment is rooted in his belief that there is a fundamental mismatch between who universities and bootcamps currently serve. The former focuses on getting students degrees; the latter helps working adults and better jobs. And because the majority of people who attend bootcamps already have degrees, he argues, they would not be eligible for Title IV funding anyways.
As a private lender for bootcamps, Skills Fund has financial interests at stake. Skills Fund offers loans to students to attend bootcamps that meet its bar for quality. The company makes money from students after they graduate and pay back the loan, which includes a fixed interest rate that ranges from 6 to 8 percent for three-year loan terms, and up to 10 percent for five-year loans. (Federal student loans, by comparison, range from 4 to 7 percent.)
Founded in April 2015, the Austin, Texas-based company has partnered with 29 bootcamps across the country, including notable providers such as General Assembly, Dev Bootcamp and Bloc. The majority of the money Skills Fund lends comes from a $11.5 million seed round that the company raised from Iowa Student Loan Liquidity.
Since loan payments are Skills Fund’s only revenue stream, and students will likely pay only if they land jobs, O’Donnell claims “we have aligned incentives by being both a quality assurance party and a lender to students.” There’s a risk-share model by which both the schools and Skills Fund lose money if students default. (Some portion of the tuition money that Skills Fund loans to students goes into an escrow account, which goes back to the company if students default.) “People like that we have skin in the game,” O’Donnell adds.
All of Skills Fund’s partners undergo a due diligence process that include the following criteria: a clear and transparent admissions process; a rigorous curriculum and assessments that align with skills that local employers want; teacher reviews; and most importantly—where graduates actually land jobs in the area they went to school for. Roughly 25 percent of bootcamps that applied to be Skills Fund partners have been rejected.
How coding bootcamps report outcomes data has been a source of concern, especially for government regulators. Most of these statistics referenced by the government and media come from Course Report, which has conducted annual surveys for the past two years. But because the data is self-reported, skeptics have questioned its reliability—especially 99 percent job-placement claims. Questions have abounded, for instance, over whether these new jobs are actually relevant to what a student has learned. (Udacity’s “get hired or your money back guarantee,” for example, counts a paid internship as a job.)
Skills Fund says it collects disaggregated, anonymous data from its partners in an effort to create a clearer standard for reporting outcomes data. This work will “ensure that reporting of student outcomes is accurate, fair and transparent,” O’Donnell says.
Similar Aims, Different Approaches
Skills Fund is not alone in providing private loans to bootcamp students; a growing number of “fintech” startups including Pave, Earnest and Climb Credit also offer similar services. And neither is it the only group establishing new processes for evaluating the “quality” of a bootcamp. General Assembly recently published its own framework based on nationally adopted accounting standards. Entangled Solutions, based in San Francisco, is currently polishing its own guidelines (PDF) for assessing the quality of bootcamp providers.
These frameworks share similar criteria, including whether a program can back up its claims, offer rigorous assessments and report meaningful job-placement data. Entangled also examines the long-term financial stability of bootcamp programs, along with students’ reflections on their experiences.
Paul Freedman, Entangled’s CEO and co-founder, says his group is working with a cross section of industry and government leaders to finalize the framework, after which it will be owned by a separate nonprofit party. Entangled itself will not audit bootcamp programs; instead, third-party organizations such as accounting firms will perform the auditing. Thinkful, an online bootcamp based in New York, has borrowed this approach and recently published an audit (PDF) from an independent accountant about its job-placement claims.
That multiple parties are critically evaluating what “quality” looks like is a welcome sign for students and an industry that now numbers nearly 70 bootcamps, according to Course Report’s latest count. But the possibility of having different—or even competing—standards could be worrisome. Will different groups compete to perform quality assurance reviews on alternative education providers? If so, which will be the “gold” standard?
It’s still early days, says Michael Horn, principal at Entangled Solutions, who adds that “it’s friendly right now; the pie is undefined and we’re trying to work together.”
It’s worth noting that while Entangled Solutions is purposefully positioning itself as a QAE for EQUIP, Skills Fund is not. The two companies may be driven by similar motivations to raise the quality and transparency bar for the bootcamps, but differ in their beliefs on how these programs can best serve different kinds of students.
“We will continue to do quality assurance on bootcamps whether EQUIP goes ahead or not,” O’Donnell tells EdSurge. “It doesn’t change our core mission, which is to accelerate the growth and access to high quality bootcamps.”