Why we don’t believe in Income Share Agreements

Coding Bootcamp Life

In the last few years a new form of financial agreement has appeared, first in coding bootcamps but more recently in traditional education too. These arrangements, called Income Share Agreements – or ISAs – have a simple premise. In lieu of up-front payment for services, students agree to pay their schools a percentage of their income for a period of time, either until their debt is repaid or a time limit expires.

On the face of it, this arrangement seems like a win-win. Schools are incentivised to provide a first-class education which results in a job with a good salary. Access for students is opened up to those of lesser means, and repayments only begin once they have an income.

Operating in an industry where lots of our fellow bootcamps offer ISAs, we’ve looked at them carefully and investigated offering them for our students. For the time being, we’ve decided against offering ISAs to our students, because we don’t believe they offer a fair deal, and we think there are better alternatives. Here’s our thinking. 

How do you value something that has no price?

Put simply, we believe that people should know what they’re going to pay for a service. It’s impossible to judge the value of a course without knowing the price. We keep our pricing simple, and list it on every course page for every location we operate. 

We think our courses are amazing value for money, but we also want our students to be able to make that judgement for themselves, so we give them all the information they need to do it.

Different pricing for different people is discriminatory

Under Income Share Agreements every single student will have a different repayment schedule, and every single student (except those who pay back the full amount, or nothing at all) will pay a different price for the same service. 

Imagine you went to a restaurant and later found out everyone was paying wildly different amounts for the same meal – doesn’t seem very fair, does it?

Successful students subsidize the unsuccessful

Schools that operate exclusively or predominantly on Income Share Agreements are comparatively much more expensive than other schools. There’s a reason for this – dropout rates are high, while hiring rates and starting salaries (and hence repayment rates) for graduates are lower. 

So while a school with up-front payment options might generate €30,000 from six students who pay €5,000 each, an ISA school may need to generate that entire €30,000 from one student because from the original six, three drop out and two do not get jobs. 

This creates a frustrating situation for committed students. If you work hard, complete your course and get your dream job, many of the repayments you’ll make over the next few years won’t only be covering your own tuition, they’ll be covering the tuition of your unsuccessful classmates too.

Complex financial products tend to get messy

It’s a universal truth that the banking industry loves to make things more complicated, and when you sign up hundreds or thousands of students to ISAs worth €15,000 or €30,000 each, you suddenly have something that looks a lot like an investment vehicle.

Although ISAs are a fairly new phenomenon, we’ve already seen institutions soliciting investment based on the guaranteed returns of their ISA portfolios. This opens the door to changes of ownership and alteration of terms.

This happens regularly with traditional student loans in the USA, and the outcomes for students are never positive. Private investors are focused solely on generating a financial return, not the welfare or career prospects of students.

There are better ways to open up access to education

Income Share Agreements are not the only way to make education accessible to people with lesser financial means. We have our own deferred payment option which allows students to be admitted to our courses by only paying a deposit, and repaying the rest of their tuition when they are working.

Crucially, students using our deferred payment option will always know how much they need to repay, they will not repay vastly more or less than other students, and we are never entitled to a percentage of their salary.

You can see more details of our financing options here.

We’re in an exciting industry where lots of people are trying new things, and there are sure to be new ideas coming where school financing is concerned. But as an educational institution our mission is to provide our students with a first-class education and treat them fairly along the way. For now, Income Share Agreements are incompatible with that mission.

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