Why one coding bootcamp is ditching income-sharing agreements
Make School, one of the earlier “coding bootcamps” to use income-sharing agreements, has quietly pivoted to traditional college loans that it covers until graduates find well-paid software development jobs. This is cheaper for students (and itself), the school tells Axios.
Why it matters: In recent years, income-sharing agreements (ISAs) have been hailed by some as the key to fix the college debt crisis because they seemingly hold schools responsible for their graduates’ professional—and financial—success.
Flashback: So-called coding bootcamps made headlines years ago as a quicker and cheaper route than college degrees to getting a job in software development.
- A number of programs turned to ISAs, which let students pay back tuition costs if and when they get an engineering job with a certain minimum salary. Then, they pay back a percentage of their income, usually with a cap on the total repayment period.
- The pitch to students has been accountability— the programs are incentivized to train them well enough, or else they won’t get their money.
Make School was among the earliest to adopt ISAs back in 2014, but this year it made a pivot.
What they’re saying: “The primary factor and the guiding principle was chasing the cheapest form of funding for students,” Make School co-founder Jeremy Rossmann tells Axios of the decision to change its financing model.
Details: Students still get the benefit of not paying back the loan until they have job. Make School directs students to tap into available college financing options in this order:
- First are Pell Grants and Cal Grants, which means entirely free money for a qualifying student. About 40% of Make School’s students qualify for Pell grants.
- Next are government Stafford Loans, which currently have an interest rate of 2.75%, as well as government Parent Plus loans at 5.3%.
- And lastly, private loans, which usually have higher interest rates.
- Make School puts about 8% of the tuition it receives from these sources into a fund to pay off a graduate’s loans until they find a software development job that pays at least $20,000 a year (the full repayment kicks in at a $60,000 salary).
- Overall, students end up paying back less than with the prior ISA program.
Under Make School’s old ISA program, the school took out loans, backed by the students' ISAs, had to charge graduates more because of the higher interest rates.
- ISAs with different terms are still available, though now as a last resort for students with existing debt or to cover what loans don't.
Between the lines: “At the end of the day, government loans are cheaper,” says Rossmann, though he concedes this calculus may change if loan interest rates go back up.
Yes, but: Fundamentally, Make School and others are still very much vocational programs intended to help graduates get a job, even if they can be flexible when life events delay those goals.
- The pursuit of education for learning's sake is still only accessible to those fortunate enough to afford it via their own means or scholarships.