How harnessing the resources of corporate America strengthens higher education and helps working adult students
It has become a cliche that American higher education is paradoxically both the envy of the world and abysmal.
It is the envy of the world because the sector helps drive American productivity and competitiveness with a diversity of institutions. And it is abysmal because runaway college costs have significantly outpaced inflation, which has resulted in more than $1.7 trillion of student debt.
That might be tolerable if student outcomes were universally good, but they aren’t: Paltry graduation rates and labor market outcomes have left far too many students struggling to repay that debt.
Part of the historic challenge contributing to these dismal outcomes lies in incentives. Today’s higher ed system is fundamentally misaligned with students’ desired career outcomes, and with the needs of the US labor market. The primary “customers” of higher ed are individual students and the government, and neither are driving the changes we need.
Today, the government finances higher education for many students, but it pays for enrollment — not value or outcomes. So, after setting a lower bar, government policy offers no incentives to improve student outcomes or align to market needs.
Unlike traditional markets, the individuals who pay for college — or use government financing to afford tuition — similarly struggle to influence value or outcomes. We don’t price college to outcomes, and enrollment is a choice people make once or twice, gaining no consumer knowledge over time. Moreover, students struggle to understand the relationship of school brand, program, and career pathways, leading to decisions shrouded in opacity and unhinged from value.
That’s where employers come in. We can work to align the economic interest of the US private sector with the well-being and prosperity of individual Americans.
The private sector has an intrinsic reason to focus on value — with alignment on both principles of affordability and student outcomes. But business has been underutilized in the college financing and selection equation.
Companies that pay for employees’ education do so to create an economic return. They are not doing so solely out of altruism.
Although that might sound pernicious, employers’ investment in fact creates positive incentives to lift up American higher education’s abysmal outcomes. Companies are rational actors, and when they invest in their talent, they want value — high quality at the lowest price.
Companies have no appetite for weak outcomes. For them, quality equates to attracting and retaining top talent for in-demand roles, helping employees upskill and advance to contribute more to the business, and helping those individuals reskill to fill critical positions.
When employers do pay for their employees to learn, they become frequent and repeat buyers of higher education. That means they gain experience as sophisticated customers and have the ability to learn from the data and their choices. The process and their incentives lead to an even sharper focus on value —affordability and outcomes in the form of learning.
At Guild, we get to see this value alignment in action daily. Many of us spent years working to support traditional higher education, and working adults struggled to succeed in that system. Today, it’s exciting to be working on the problem in a way that’s solving for quality and cost at scale.
In our work, we partner with employers to understand the skills and roles they need to succeed. We help them source the best academic institutions and programs to provide the education for what their business demands. If a school underperforms on outcomes or raises prices above quality, the employer stops buying from them.
Employers manage their education budgets to outcomes. They do a great job ignoring the superfluous elements of higher ed brands, and often lift up universities that lack well-known names but that deliver great results for working adults attending part-time. On the other hand, if they see their learning and development budgets growing relative to the numbers of students with successful outcomes, then they put pressure on Guild and our partners to deliver lower-priced programs that don’t sacrifice outcomes. Unsurprisingly, Guild doesn’t support any programs with $60,000 annual price tags.
The other part of our work is helping employees find the programs that match their interests and desired career paths. If students don’t get the learning and outcomes they desire, they won’t re-enroll, and neither will their peers.
Alternative programs that load up students with debt also don’t work: Most students won’t enroll in the first place, and those that do won’t stay enrolled. Without an educated talent pipeline, employers won’t be able to attract the talent they need nor get the upskilling and reskilling returns they want. Unsurprisingly, our partners have designed programs so that 97% of Guild learners on tuition assistance are debt free.
So what is Guild’s business model alignment? Guild’s core revenue stream is for the services that we provide to employees, including technology, support, and coaching. We’ve designed our model such that we’re agnostic about who pays for those services — employers or our learning partners. This structure helps align us with the success of all of our stakeholders — employees, employers, and learning partners.
Employers tend to pay for services for all of their employees — like platform access and career exploration — and they sometimes pay for direct learner services, like success coaching and career services. Additionally, employers pay tuition directly to learning providers, and in the majority of instances, those learning providers take the savings from costs they no longer incur in Guild’s marketplace, such as advertising, and use those savings to pay for Guild’s technology, support, and coaching. In that instance — the employer is the originating payer, but the learning partners are the direct payer to Guild.
Regardless of the payer, however, Guild gets paid on a term over term basis as the student succeeds, rather than upfront in full like other models. Moreover, we deliberately do not share the payment model or unit economics of our arrangements with schools with our member and learner services teams to prevent conscious or unconscious bias.
With that framework and those protections in place, Guild’s long-term incentive is outstanding student success at the lowest possible cost.
Additionally, we have positive incentive alignment to curate high-quality, low-cost schools.
Our business isn’t sustainable with low-performing programs that don’t produce outcomes. Employers won’t use their money on shabby products. And Guild will lose their business. And if Guild tries to direct employers or students to high-priced programs out of a theory that we make more money by doing so, then employers who focus on value — the best outcomes for the lowest prices – will reject our recommendations and pass on working with us.
This adds up to a business model alignment for Guild to work only with programs that offer high retention and low dropout rates for the part-time students we support. As a result, 75% of the learners Guild supports have completed or are actively progressing in their program. That is a stark contrast to the six-year graduation rate of 34% for part-time students; it even ranks favorably to the nearly 40% of full-time students who don’t graduate within six years.
So while some higher ed thought leaders philosophically question the role of the private sector in education, we appreciate the real role it is playing in rewarding quality, decreasing cost, and influencing the value equation for their employees and the whole market.
With Guild’s double bottom line mission of doing well by doing good, we’re proud of our outcomes today, and equally proud of the business model alignment that we know will fuel positive outcomes for a long time to come.