RAchit's story

Step 1: Setting Up the Initial Investment and Salary

 

Investment by Skillsvest:

• Skillsvest invests $180,000 in Rachit, covering tuition, living expenses, and career preparation. This initial investment is based on the total cost of his Master's at Princeton.

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Starting Salary After Graduation:

• Rachit begins his career in San Francisco with an initial yearly salary of $220,000 (Average Princeton CS masters salary)

• This salary is projected to grow at an average rate of 3% per year, reflecting typical salary growth trends in the tech industry.

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Step 2: Defining the Comfortable Living Threshold

 

Comfortable Living Threshold:

• The comfortable living threshold is the minimum income Rachit needs to live adequately in San Francisco, allowing him to manage day-to-day expenses without financial strain.

• For San Francisco, this threshold is initially set at $35,000. This is a common estimate for the cost of living in the area, accounting for rent, groceries, transportation, healthcare, and basic leisure.

• The threshold is set to grow at 3% per year to reflect the rising cost of living in San Francisco, aligning with the average inflation rate for living expenses.

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Excess Income Calculation:

• Excess Income = Salary - Comfortable Living Threshold

• Skillsvest’s model collects this excess income as repayment toward the investment until the IRR is hit. This ensures that Rachit’s basic living needs are covered first.

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Step 3: Annual Repayment Calculation and Timeline

 

Using these initial assumptions, we calculate Rachit's repayment over time by applying the 3% annual salary growth and 3% inflation. Here is how each year breaks down:

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1. Year 1

   • Salary: $220,000

   • Living Threshold: $35,000

   • Payback amount: $185,000 ($220,000 - $35,000)

2. Year 2

   • Salary: $220,000

   • Living Threshold: $36,050

   • Payback amount: $65,000 (only $65,000 is required to hit the IRR)

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Total Repayment over 2 Years after graduation:
By the end of April in Year 2, the cumulative excess income reaches the agreed IRR* OF 20% (repayment target, allowing Rachit to fulfill his financial obligation to Skillsvest). This repayment structure provided Rachit with financial security during the early stages of his career and allowed Skillsvest to reinvest in new talent.

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Rachit has contributed $240,000 dollars which is 1.38 Times his initial investment made by skillsvest. We have not added taxes here for the sake of simplicity with taxes he would pay around 1.48X approximately

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Rachit would not have had to pay back anything to Skillsvest if he was not able to land a job due to visa problems, job market crashes or other unfortunate circumstances.​

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Step 4: Outcome and Mutual Success

 

Rachit’s Success:

• Now, at 28, Rachit earns over $300,000 annually, a significant increase from his previous income in India. This success is a direct result of the education and opportunities made possible through Skillsvest’s support.

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Skillsvest’s Success:

• By aligning our repayment model with Rachit's career growth, Skillsvest achieved the agreed IRR and can now reinvest in other students, fostering a sustainable cycle of opportunity and impact.

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*What is IRR: A fixed Internal Rate of Return (IRR) is a compounded annual interest rate representing the return on our investment