Edmit wants to do for college-shopping what Zillow is for homes and what Truecar is for automobiles.
Startups can be smitten with analogies, so this is what Nick Ducoff, the Boston-based startup’s cofounder, aims to do: help students make financially savvier decisions about where to go to college. The tool lets users compare how much their peers are paying at different institutions.
“We’re hoping that by using our site, students and families will find that college is more attainable, and more colleges are attainable than they may otherwise think,” says Ducoff.
The idea’s enough to entice investors as well. Edmit has raised $855,000 in a pre-seed round. Investors include Bessemer’s 15 Angels fund, Rethink Education’s seed fund in partnership with Southern New Hampshire University and Tuscan Management.
Here’s how Edmit is supposed to work. Prospective college students first enter their GPA, standardized test scores (either the SAT or ACT), ZIP code and current high school. It then combines that with publicly-available information about higher-ed institutions, such as data on pricing and financial aid. Based on this mélange of data, it then gives the student a tuition estimate for the institution he or she is considering.
Ducoff says updates to Edmit will “allow more personalization through additional information such as subject test scores and accolades.”
According to Ducoff, the idea for Edmit came about from catching up with a friend who had a college-bound son. Despite “having great access” to information, he says, that friend was “mystified and felt disenfranchised by the college admissions and financial aid process.”
Already there are publicly-available tools to help students and families navigate the college-application landscape, along with financial aid options. Take the net price calculators on colleges’ websites. Students and their families can punch some numbers into those to get an idea of how much they’ll pay to attend a particular school.
But Edmit cofounder Sabrina Manville says that while individual net price calculators can give students a picture of financial need, many students don’t know what else they might get in terms of scholarships. Ducoff says that Edmit also considers merit aid.
But Mark Kantrowitz, a financial-aid expert and the publisher and vice president of strategy at Cappex, isn't sold on Edmit's model.
“There’s a lot of hype here,” he says. “Basically, they’re a college search tool. And there’s already a fair amount of information available. Net price calculators on college websites became available on college websites, [as] a requirement, in October 2011. And those could be improved, but they are providing you with a ballpark estimate of how much a college will really cost with the discounted sticker prices.”
Colleges that use the College Board’s net price calculator, as well as ones that use the CSS Profile form (a form many private colleges use for institutional financial aid), take all federal, state and institutional gift aid, including merit-based scholarships (but not private scholarships) into account, Kantrowitz says.
A quick run-through of existing price calculators on major college websites show that these tools take a variety of information into consideration. The University of Alabama’s net price calculator, for instance, gave an estimate for a merit-based academic scholarship as well as Pell Grant support, after asking for a student’s financial information, as well as GPA and ACT and SAT scores. The University of Southern California’s net price calculator did not ask for academic stats, and as such, did not give a merit-scholarship estimate. Another school that uses the College Board’s net price calculator, the University of San Francisco, asked for a GPA but explained on the results page that for the sake of the calculator, it “combined merit and need-based awards as ‘institutional grant.’”
Ducoff says that net price calculators have varying degrees of accuracy and comprehensiveness. He points out that the College Board calculator has data for about 215 schools—only about five percent of higher education institutions in the country. He says his company will give estimates for all four-year colleges in the United States.
He adds that net price calculators rely on self-reported formulas from colleges and “don’t provide the full picture.” He says that consumers wouldn’t rely on the pricing sticker that dealers put on the car window—they’d use a publicly traded company like TRUECar to get “unbiased, market-based data.” He stresses that he and Manville don’t think colleges “are bad actors,” but think there’s a “need in the market for a consumer-oriented, data-driven, technology solution for college tuition pricing.”
The company has yet to sign agreements with any colleges. It is currently testing the product in private beta with students and parents. Hundreds have signed up on the waitlist to get early access to the product, says Ducoff, who adds that it will be released to a “general audience’ in December. Edmit is also considering a revenue model that would charge the user something akin to a broker fee. Specifics are still being hashed out, but he says the fee could be 10 to 20 percent of what the tool saves the student “above and beyond whatever they’re given in their initial award letter.”
But Paul Wrubel, another college financial-aid expert, wonders if subsidized loans would count in that revenue model.
“If so, the agent would get money for raising the cost of college for his client,” he says, adding that families are “pretty reluctant” to pay anyone for online services.
Ducoff says that if Edmit adopts a consumer-pay business model, it would only look to be compensated if it can “help families successfully appeal their initial aid awards.” He compares it to companies that help real estate owners appeal their tax assessments and get paid a success fee. And he believes the internet has “radically changed” the way people evaluate and make large purchases.
Edmit is also testing whether it can charge colleges a “management fee” so Edmit could manage part or all of a college’s financial-aid budget, with the goal of increasing enrollment and yield, says Ducoff. Financial-aid budgets aren’t managed externally now, but he says there are consultants and advisors who help colleges “define their marketing, pricing and enrollment strategies.”
“Those consultants are paid to analyze macroeconomic trends in the market and what they mean for a particular college,” Ducoff says. “Colleges then implement all or part of the recommended strategies and the consultant is paid irrespective of performance and works exclusively in an advisory capacity.”
Ducoff says Edmit would give colleges more opportunities to tweak their awards after they've already issued their initial decisions and aid awards.
“Students and families benefit from increased aid awards and colleges benefit from additional enrollments and higher yield," Ducoff says.
Wrubel can’t imagine any college allowing an outside entity any power over its discretionary accounts. Colleges would “never be willing to put their own reputation or any part of it in the hands of a third party” unless that third party was a fully-trained, licensed financial professional “who is bonded and who carries all the essential insurance coverage and risk.”
Ducoff, though, says that this college-pay business model is something Edmit is testing with its university contacts and is still in development.
“In any event we think that having Edmit help optimize financial aid awards is considerably lower risk than outsourcing core academic functions, which many universities are doing,” he says.
Kantrowitz points out that there are federal laws that prohibit colleges paying companies based on enrollment; it’s called an illegal inducement. “When it comes to domestic applicants, US citizens and permanent residents, colleges are not allowed to pay in exchange for enrolling a student. Now, they can pay someone to come in and do statistical analysis and make recommendations, but they can’t pay for students.”
Ducoff defended Edmit by saying its college-pay model would be based on the services it provides “to a segment of the college’s admitted students.”
For now, it seems the model remains a work in progress in a complicated landscape.
An earlier version of this article did not mention Mark Kantrowitz's connection to Cappex. The article has been updated to reflect that.
