An Income Share Agreement (ISA) is a new financing arrangement now popular in the United States which turns out to be a valid alternative to student loans. In recent years, many schools and bootcamps courses have been created to offer an Income Share Agreement payment option. Having adopted this innovative business model, they can afford to offer access to courses of different duration, from a few weeks to a few months, to their most diligent students who don’t have to pay anything upfront.
Many of these schools offer coding courses aimed at teaching students how to become web developers in a matter of weeks. Companies demand an increasingly higher number of web developers plus programming languages keep evolving continuously. According to The Bureau of Labor Statistics, the demand for web developers will increase from 13% to 21% over the next few years. Also, universities are unable to provide enough skilled technical graduates or change their courses’ material fast enough in order to keep them relevant and meet the increasing demand.
Tuition costs for coding courses are around $ 14,000, a figure that young people at the beginning of their careers can hardly afford. For this reason, schools and bootcamps that offer the Income Share Agreements option can reduce the entry barriers for students who cannot afford those fees.
What is an Income Share Agreement?
An Income Share Agreement (ISA) is a contract between a student and a school in which the student, instead of paying the school fees with a bank loan, reimburse the cost of the course after graduation with a percentage of the salary for the time needed till the agreed amount is repaid.
It should be immediately clarified that the students need to repay the cost only when they find a paid job. This is perhaps the main difference with a student loan where the debt needs to be re-paid regardless of whether the student gets a job or not.
ISA brings a couple of positive side effects too. First of all, they offer a significant risk reduction for the students as the installments will only be a percentage of their future salary, unlike the student loan that has a fixed amount regardless of income received. If the students don’t earn enough after graduating they might not be able to afford to repay the debt. With an ISA the student knows that will be able to always afford to pay the cost of the course.
Another positive side effect regards the school that is the one bearing the risk in this case, paying for the cost of the courses upfront and therefore must ensure that it has a good return of investment. To do so the school makes sure to select the most engaged students, interested in the subject matter. It also provides high-level training to students in the hope that they will be easily hired and receive the best market salary. They also have an interest in creating solid networks with businesses in order to speed up the hiring phase of their graduate students.
So in summary, the student who opts for an Income Share Agreement has access to a high-level education without incurring any upfront costs and will be in the interest of the school to find a job using the school’s large network of related businesses.
Read also: The evolution of online education: from MOOC to Cohort-Based Courses
What kind of Bootcamps and Schools offer the Income Share Agreement option?
In recent years, more and more schools and online bootcamps have sprung up, offering courses with the Income Share Agreement option aiming to invest in the education of a new generation of students.
As we can see from the best bootcamps list below, those that have adopted the Income Share Agreement model are mostly focused on teaching students how to code. This is due, as mentioned at the beginning of the article, to the increase in demand for software developers and IT industry professionals.
Understandably, schools and bootcamps that offer Income Share Agreement courses must direct their efforts on preparing students who have a better chance of being hired. This is to make their business model based on the Income Share Agreement options, sustainable. Unfortunately, at least for now, this type of contract is difficult to apply to sectors with a high unemployment rate where there is an imbalance between supply and demand for a given skill, obviously an imbalance towards supply.
In the tech sector, it's the other way around, there are few developers and a huge global offering driven by Big Tech and startups financed by Venture Capital. These companies with huge liquidity, are in a hurry to grow and develop innovative products to gain market share and win over the competition. It is also interesting to note how Venture Capital themselves, such as Y Combinator, have begun to invest in the development of these new innovative schools that use the Income Share Agreements.
Best Bootcamps and Schools offering Income Share Agreement
Bloom Institute of Technology
Bloom Institute of Technology's motto is “Pay nothing until you make it”. It is perhaps the first and most renowned school for learning how to code, entirely online with remote teaching that has successfully offered courses under the Income Share Agreement. It has received over $ 120 million in investment and it has been supported by Y Combinator.
A 6-12 months commitment by the student is required by the school that will skill up new web developers and data scientists. During the course, experts of all kinds and professionals of the highest level who have gained experience in places such as NASA, Google, Apple and in universities such as Stanford University are invited to teach and share their experiences. The course is free and students are required to repay the course in 2 years by reimbursing 17% of the annual salary but only after the salary they get is at least $50,000/year.
Microverse is another of these innovative online coding schools. The application process is divided into 4 steps: the "Pre-coursework" first step where the student who is new to programming can prepare independently by learning the basics to be able to have the skills required to take part in the second step "Coding challenge" lasting 2-4 hours in which the student must demonstrate that has the correct mindset and the ability to face the challenges of an intensive programming course.
The third step "Trials" consists of carrying out a project in a group together with 3 other applicants. Only after passing these three steps, the student is admitted to the 12 months long course.
There are no costs to be paid upfront but as with the other schools the student will have to repay Microverse only after finding a job that guarantees him a salary of at least $1,000/month of which he will have to set aside 15% as a reimbursement of the course up to a total of $15,000.
Strive School is another of these programming and artificial intelligence online schools whose mission is to bring to Europe the same model already successfully tested by Lambda School in the United States. Based in Germany, offers courses with Income Share Agreement for European students.
Courses are held from Monday to Friday, offering more than 1000 hours worth of lessons. Students must guarantee a commitment of at least 6 months and to repay Strive School through an Income Share Agreement with 10% of their salary for the duration of 30 months.
In addition to being one of the first online schools to offer this innovative model in Europe, Strive School also offers another 3-week course on Zoom totally free of charge for students who have no technical background to teach them the basics of programming.
The schools listed so far, only offer coding courses. Finally, a school that gives courses with Income Share Agreement focused on a different topic: marketing. During my research for this article, I found that SkillBank is the only school to offer a 15-week course for students who want to learn marketing skills to accelerate their careers in this sector.
The agreement for the students is to pay the school’s fees only after being hired by a company, setting aside 10% of their salary for 2 years or upon reaching a total of $ 15,000. The students will have to pay this sum to SkillBank only upon reaching a salary of at least $ 3,300 per month. SkillBank also offers the classic solution of paying for the course upfront, $ 8,000 divided in three installments.
As we can see, these schools have adopted an innovative model and can also be an example for institutional training bodies such as universities. The innovation consists in offering Income Share Agreements to their students, making education more democratic, especially in countries such as the United States where university fees are very high and students have to go into debt for many years in order to access the best education.
These schools are 100% online and classes are given remotely which is also a factor that makes the education of the future more democratic, scalable and flexible, because anyone, based anywhere in the world, can access high quality intensive courses without facing the costs of moving to other cities or countries where the best training schools and universities are usually based.
Finally, as already mentioned, thanks to the Income Share Agreements, schools are encouraged to offer quality courses and to help the students even in the post-course phase when they have to embark in the search of a new job to kick start their career.
Almost all of these schools have created their own job placement section by creating relationships with companies that are ready and willing, at the end of the course, to hire the new undergraduates. The hope is that new schools of this type will be created and that they will offer the Income Share Agreement not only for those who want to become web developers and data scientists but also in other sectors.
The hope is that more and more schools of this type will be created and that they will offer the Income Share Agreement not only for those who want to become web developers and data scientists but also in other sectors, perhaps even offering some humanities subjects the world still desperately needs.