As finals season approaches, college students are finding themselves with an unexpected advantage: free access to advanced AI tools. OpenAI is offering students two months of free ChatGPT Plus, normally priced at $20 per month, through May. This move is part of a larger trend where AI companies are providing students with free or significantly discounted access to their premium services.
Other companies, including Anthropic, xAI, Google, and Perplexity, have also launched similar promotions targeting college students. These deals are not subtle; an xAI employee recently messaged students with the greeting, “Good luck with finals,” alongside details about their offer. The strategy is reminiscent of the 2010s when startups fought to win users by offering cheap access to their services, creating what was known as the ‘Millennial lifestyle subsidy.’
The Rise of the Gen Z Lifestyle Subsidy
College students have already established themselves as power users of AI technology. OpenAI’s vice president of education noted that ‘more than any other use case, more than any other kind of user, college-aged young adults in the US are embracing ChatGPT.’ Gen Z is using AI for more than just schoolwork; they’re creating personalized workout plans, generating grocery lists, and even seeking romantic advice from chatbots.
The current promotions are helping AI companies attract and retain young users who are unlikely to pay hundreds of dollars annually for premium services. Anthropic, for example, launched a ‘campus ambassadors’ program to boost interest among students. One ambassador, Josefina Albert, shared the deal with classmates and even reached out to professors to promote the offer.
The Cost of Free AI Services
While the deals seem attractive, they come at a significant cost. With approximately 20 million postsecondary students in the US, if just 1% take advantage of free ChatGPT Plus for two months, OpenAI would effectively be giving away $8 million worth of services. While $8 million is a rounding error in Silicon Valley, the real cost is much higher when considering that AI companies are footing the bill for all users, not just students.
OpenAI has over half a billion weekly users, with only a fraction being paid subscribers. The company spends tens of millions of dollars processing user requests, and the cost of training advanced models could be as high as $1 billion. Despite enormous valuations – OpenAI was recently valued at $300 billion – these companies are currently unprofitable. OpenAI is projected to lose nearly $7 billion this year, with potential losses growing to $20 billion in a few years.
The Future of AI Subsidies
The ‘Gen Z lifestyle subsidy’ is likely to end when investors demand returns. While technical improvements are increasing efficiency and reducing costs, AI companies will need to find revenue streams. OpenAI is considering selling ‘PhD-level research agents’ for $20,000 per month. The company is also working on search and social media features, potentially perfecting business models that have been decades in the making.
As students become accustomed to using AI for various tasks, they may become dependent on the technology. While some young users are already heavily reliant on AI, others express mixed feelings about its impact. Jaidyn-Marie Gambrell, a 22-year-old user, reported using ChatGPT to customize her McDonald’s order based on her dietary goals. While convenient, she acknowledges that ‘that level of convenience… can be abused.’
The question remains: how long will AI companies continue to offer free services, and what will happen when the subsidies end? As with the Millennial lifestyle subsidy, the Gen Z lifestyle subsidy may eventually come to an end when investors demand profitability. Until then, students will continue to benefit from the convenience of AI, but at a cost that will eventually be passed on to them or other users.
