The Historic Rise of Income Share Agreements

Blog Apr 21, 2020

Over the past few months, I've become completely fascinated by Income Share Agreements and how much of an impact they're having on higher education.

For those that might not know, ISA's are a way for students to finance education without paying upfront. Instead, students pay back the institution by sharing a percentage of their income for a fixed number of years.

ISA's are a hotly debated topic, but one of the biggest benefits is that they align the incentives of educators and students.

Programs have to actually deliver results in order to get paid.

The idea of Income Share Agreements have been around since 1955, but they haven't seen mass adoption until recently.

This post covers the recent history of ISA's and how they helped kickstart the coding bootcamp revolution.

Kush Patel, Founder & CEO of App Academy, and I recently had an in-depth recorded conversation exploring this topic.

From what we could tell... the spark for the coding bootcamp revolution came from a single hacker news post. This one to be specific:

This is the first semblance of an ISA being used with respect to software engineering education that I could find.

Back in 2011, Kush and his brother saw this post and decided to enroll. This is how Kush describes his experience:

"you'd be putting in close to a hundred hours a week I mean, I literally dreamed in code.  It was wild. I never thought anything like that could happen"

After the program, Kush saw how quickly other students were able to land jobs and start their software engineering careers. What impressed him the most was how impactful the program was on their lives.

Students of the program went from being baristas and service workers making minimum wage to suddenly making six-figure salaries as Software Engineers at the biggest tech companies in the world.

Seeing this firsthand is what he says gave him the idea for App Academy.

He and his co-founder launched the company in June of 2012. Not long after that, they become the first coding bootcamp to incorporate an Income Share Agreements as a financing option.

Others would fast-follow.

Make School in 2014. Lambda School in 2017. Flockjay in 2018. And now, in 2020, hundreds of programs are using this "deferred tuition" model.

ISA's have had a few false starts, but for the first time, it looks as if they're off the races.

I believe largely this is because never before had the market been aligned for this type of financing to succeed.

Software engineering education became the first killer use case for ISA's. And now, it's quickly seeing mass adoption.

It's so important that we start to see this idea spread now more than ever.

According to the Washington Post, over 10M Americans filed for the unemployment benefits in the month of March alone. We're seeing some of the highest unemployment numbers since the great depression.

These individuals need job training and they need it now. Traditional higher education isn't going to cut it.

We need a new method of job training.

One that is accessible from anywhere, provides trade-specific knowledge (no fluff and can be completed in <1 year), and is generally risk-free (leverages an ISA or a deferred-tuition model).

If there was ever a time for ISA's and career accelerators to thrive, it's now.

And it's all thanks to an innocent Hacker News post from 2011.

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