Udacity U-Turns on Money-Back Guarantee

It was hailed as a “dream come true” by Udacity’s founder and CEO Sebastian Thrun.

“We now GUARANTEE a job for anyone who completes a Nanodegree Plus -- or else tuition back. Hope other universities follow,” tweeted Thrun in January 2016.

Now, it seems, the dream is over.

Udacity has quietly scrapped its pledge, nixing the program, which guaranteed a job within six months of graduation or 100 percent of students’ money back, at the end of last year.

Announced with much fanfare, the job guarantee applied to Udacity’s Nanodegree Plus program, an enhanced version of the nanodegree with access to a career adviser and career concierge services.

Udacity stopped accepting new enrollments into the Nanodegree Plus program in December 2017, and the program will come to a complete end in June. The program was priced at $299 a month ($100 more than a regular nanodegree) and was available in four areas -- Android developer, iOS developer, machine learning engineer and senior web developer. Udacity says on its website that most nanodegrees take students between six months and a year to complete.

Asked why it was ending the Nanodegree Plus program and its job guarantee, Udacity said in a statement that it was “focused on connecting learning to jobs for all our students.”

“To scale our career services globally, we’re no longer enrolling students in Nanodegree Plus programs. We’re taking the best of what we’ve learned from this limited U.S.-only program and are working to extend those services across all of our career-ready Nanodegree programs worldwide,” the statement said. Udacity didn't expand on why it had decided to pull the Nanodegree Plus program.

While career guidance for all students, not just those who pay extra, is a good thing, the demise of the get-a-job-or-your-money-back promise raises questions. Did students get the jobs they wanted? Did Udacity have to give many students their money back? Udacity declined to share data.

Ryan Craig, managing director of investment company University Ventures, noted that none of the major employers associated with Udacity will publicly commit to hire or interview nanodegree candidates. Craig pointed to a 2017 report from VentureBeat, which stated that of around 10,000 students who had earned nanodegrees since 2014, around 1,000 had found jobs as a result. “A placement rate of around 10 percent should spell the demise of any last-mile training program,” said Craig.

Craig said the effectiveness of Udacity’s job guarantee was likely very limited for students. “Money-back guarantees don’t address the real guarantee that students are seeking: a job,” said Craig.

Daniel Friedman, co-founder of coding school Thinkful, wrote in January 2016 that Udacity’s guarantee was vaguer and weaker than the guarantees offered by his own company and others such as Bloc and Flatiron School. Such guarantees are common at coding schools, though Friedman noted that some schools have had to drop guarantees because they conflicted with state regulations.

Udacity didn’t promise that nanodegree holders would get a job in tech, and it also didn’t promise a big salary, said Friedman. Udacity’s guarantee said that students should earn more than the cost of their tuition in three months. If a person graduated in nine months (at a total cost of $2,691), they’d only need to earn $900 a month to meet Udacity's salary expectations -- less than minimum wage, said Friedman.

Phil Hill, co-founder of Mindwires Consulting and co-publisher of the e-Literate blog, said that Udacity’s decision to drop the job guarantee may have been driven by the company’s desire to soon go public. “Investors want predictability in income and growth, and they typically don’t like unknown liabilities,” said Hill. The money-back guarantee was risky and uncharted territory for the company, he said.

Of course, Udacity’s money-back guarantee came with conditions. Students had to apply to at least five jobs per week, and these applications had to show “clear good-faith effort and be tailored to the role and the company.” In addition, students were required to meet with the Udacity careers team and work on their portfolio in their own time.

Dhawal Shah, founder and CEO of Class Central, a review site for online courses, has been following Udacity closely. He noticed in October that the company was moving away from its monthly subscription pricing and was phasing out free courses and money-back offers, including the job guarantee, and an offer for students to get 50 percent of their nanodegree tuition back if they completed the course within a year.

Shah posits that Udacity is doing so well (the company’s revenue doubled in 2017), it simply doesn’t need to make generous offers to attract new students.

“Udacity found success with futuristic-sounding degrees like the self-driving car nanodegree, which got over 10,000 enrollments,” said Shah. The company has shifted its focus from more traditional tech job skills and is focusing on training employees for the “jobs of tomorrow,” said Shah.

It’s also possible that Udacity chose to discontinue its job guarantee because it bit off more than it could chew. “While the Nanodegree Plus idea of a job guarantee sounds good in theory, Udacity must have run into the realization that education providers cannot control what learners do,” said Hill.

Daniel Filous, vice president of marketing and product for App Academy, a coding school that doesn’t charge students tuition until they find a job, said that hinging profits on students finding a job is a tough business model for any company. Even when the school and the student do everything right, sometimes it just doesn’t work out, said Filous.

The principle of judging a school’s success by its outcomes (in this case job placement) is one that is shared by much of the education reform and school accountability movement, said Hill. But there are “so many variables that schools cannot control,” he said. While the intention is noble, “the reality is full of unintended consequences.”

“Udacity might be an interesting case study or possibly a canary in the coal mine,” said Hill. “I would hope that Udacity shares what they have learned -- positive and negative -- to inform the general education community.”