Should I use an Income Share Agreement to Fund my Coding Bootcamp?

Many non-technical professionals are using software engineering bootcamps to reskill into IT roles. Almost 59,000 people graduated from bootcamps in 2022, which aligns with a steady year-over-year enrollment rate increase of 3%. That’s quite a few students eager to join a coding bootcamp to improve their professional abilities and career outlooks. 

There are several ways to finance a bootcamp education_{Can I Afford a Bootcamp? All About How to Pay, Financial Aid, and More.}. One popular method is an income share agreement. Let’s look closer at what it is so you can determine if it’s an option you want to pursue.

What is an income share agreement?

An income share agreement, or ISA, is an alternative financing method for students pursuing their education. Sometimes, you’ll also see it referred to as “income-based options” or “income-driven repayment.” Traditional methods like upfront payments or monthly installments require students to pay before or during their courses. ISAs do not require students to pay upfront or while they are completing their education, which makes them an attractive option for those who don’t have the immediate means to pay for their education.

With an ISA, graduates pay a specific percentage of their salary every month to their university or bootcamp. This percentage doesn’t change, even if they get raises, bonuses, or move jobs. An ISA’s second component is a repayment window. A repayment window is several months or years during which students are required to make percentage payments to their bootcamp.

Though these two components are static, ISAs still introduce variability in the total cost of your education, as rapid career advancement may lead to higher salaries and paying more to your bootcamp. We’ll talk about some of the drawbacks of ISAs later.

A final point on ISAs is that they are different from deferred tuition. Deferred tuition is similar to ISAs due to the lack of upfront or monthly payments during the courses. Instead of paying at the beginning, you’re required to make monthly payments once you complete your course. Unlike ISAs, the payment amount and duration are fixed and will not vary based on your career progression.

What are the benefits of an income share agreement?

The first benefit to discuss is that this removes a barrier by not requiring students to pay before or during their courses. Upfront payments are a hurdle for disadvantaged students. In waiving upfront costs, ISAs make learning more inclusive and the bootcamp courses more diverse. Not everyone can pay nearly $10,000 out of pocket. ISAs solve this by not requiring any upfront capital.

A second benefit of ISAs is no interest is attached to the loan (although this doesn’t mean you pay back only the initial amount with an ISA — more on this later). And those with bad credit may get prohibitively high rates for student loans or may not qualify at all.

In addition, ISAs incentivize bootcamps to focus on outcomes, not just enrollment numbers. Programs that offer ISAs show they are confident their course will provide students with an education to get a job. If the student shows they’re actively searching for work but haven’t landed a job yet, payment isn’t required. This promise puts pressure on bootcamps to provide excellent instruction to ensure their students get a quality education and a good-paying job_{Switch to Tech for Jobs that Pay 80K a Year (Without a CS Degree!)} that can compensate bootcamps for the risk of deferring payment.

What are the downsides of an income share agreement?

While there are certainly benefits to ISAs, they’re not perfect. There are downsides you should consider before using them to finance your education. First, every aspect of your income will be impacted by your ISA. The percentage paid from your income will also be deducted from any overtime or bonuses you may receive. This is a reminder that the better you do, the more you will pay for your education.

Another downside of ISAs is the potential lack of payment floors. A payment floor is an agreed annual income minimum that triggers payments. This minimum salary can be reached whether or not it was met with the skills gained from your bootcamp or degree. This means you could end up working in a job unrelated to your education and still be required to pay a percentage of your income to the bootcamp.

The other drawback to ISAs is a possible absence of a payment cap. As stated before, the percentage of your income paid does not vary with the amount you make. If you have explosive salary growth_{The Top 18 Companies That Pay Software Engineers the Most in 2024} while paying off your ISA, you may pay multiples more than the upfront cost of the bootcamp.

What does that mean in practice? Here’s a hypothetical that’s not outside the realm of possibility. Let’s say that, to enroll in a bootcamp, you agree to pay back 15% of your income after you start making at least $50,000 gross. This extends over a period of two years or until you hit a maximum total payback amount of $30,000. Here’s what that would mean for you at different income levels (assuming your salary stays constant over those two years):

That means that if you reach the US real median income in your new job, you end up paying roughly $9,000 more than the $13,584 average cost of a bootcamp. Then, at the high end of our hypothetical, you hit the cap one month ahead of the deadline, spending over twice the cost of upfront tuition. 

So from a certain perspective, that seems like a bad deal, especially considering that bootcamps promise significant career advancement and commensurate salary increases. We do also have to mention that since ISAs aren’t regulated like loans are, they can have much, much worse terms than the example ones we provided.

A final downside of ISAs is restriction on job movement. Part of the point of an ISA is to maximize the payments the bootcamp receives to offset the risk of not charging upfront. To maximize payments, they want former students to make as much as possible. 

ISAs may include clauses on full time and part time work or that prevent students from taking jobs that would decrease their salary. This could be frustrating for students looking to make a lower salary for an opportunity with a startup or a company with a good work-life balance.

To avoid falling into any of these possible negative aspects of income share agreements, always read the terms carefully. Not all ISAs are the same.

Start your software development journey today!

Funding methods similar to ISAs are available if you’re interested in using this strategy to fund your TripleTen journey. However, we, like many other coding bootcamps, also offer a wide range of other methods of covering your journey towards becoming a software developer or landing a job among the ranks of fellow web developers.

There are many ways to pay for your coding bootcamp, and income share agreements are a unique tool that can make learning to code more accessible. Still, they may not be the best fit for every student. 

Learn more about what a bootcamp has in store for you and how you can finance your next great career leap by booking a call with one of our advisors.