One day in 2018, Annie Bellefleur sighed in disappointment after being turned down for a student loan. Annie, at the time, was working as a front office assistant for a healthcare company in Atlanta. It was her fourth company in an industry that she had worked in for over 10 years. After a decade of dedication to a single field, she wanted to make a career switch, and she was adamant to do so in tech. But making a career pivot takes more than sheer will. And overnight successes simply don’t often happen.
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To pull off a successful transition, Annie knew she had to be skilled enough for the industry. She’d already taken free programming courses online. But of course, knowing the basics of coding wasn’t going to cut it. She had to undergo formal training. The best avenue she could think of was through a coding bootcamp.
But there was one problem. She knew she couldn’t pay the tuition out of pocket. And with her student loan application rejected, she was out of options. So, she took a step back while keeping her eyes peeled for the next opportunity.
That opportunity came two years later. In February of 2020, Annie saw a financing option offered by the coding bootcamp General Assembly. It was an option she had never heard of before.
Through General Assembly’s Catalyst Program, she could use a type of loan that would defer tuition costs while letting her focus on her chosen field. In exchange, she would pay a set percentage of whatever income she earned after graduation, up to a maximum amount or number of payments.
“It looked strange,” said Annie. Her skepticism isn’t uncommon. Most people have questions when they learn about a new financial tool. So, Annie did the only thing she could think of: she did her research.
Breaking Down the Numbers
In 2018, General Assembly saw over 12,000 students finish its immersive programs in data science, software engineering, and user experience design. There was, however, one flaw. Half of its applicants, despite having passed the screening process, backed out from enrolling.
As gleaned from its 2018 report titled “Untapped Potential”: “GA Immersives were unable to secure financing due to FICO credit score cutoffs often associated with private loans… As a result, students with limited credit history, a handful of penalties due to late payments, or other debt obligations are unable to secure financing—perpetuating a cycle that keeps them underskilled and underemployed.”
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The average bootcamp grad spent less than six months in career transition, from starting a bootcamp to finding their first job.
General Assembly, in other words, was losing students due to exclusionary financing models. Coincidentally, that report came out the same year Annie was rejected for a private student loan. The reason: her credit score failed to make the cutoff. In August of 2018, General Assembly rolled out the Catalyst Program.
The Catalyst Program leverages a pay-for-success model known as income share agreement loans or ISAs. Although the ISA model has been offered to students for years, it’s managed to stay on the margins of financial aid, often overshadowed by the traditional private student loan option. Now, ISAs are drawing attention from bootcamps and other learning platforms that seek to expand accessibility to prospective students.
ISA structures vary by institution. However, they do share one core principle. That is, to provide students the opportunity to learn now and pay their debt later. More specifically, pay when they’re earning above a minimum income.
To protect students, the ISA comes with safeguards in the form of a payment cap, minimum income threshold, set number of payments, and fixed payment window. This way, students are protected in both downside and upside scenarios.
General Assembly’s ISA loans work like this: Students pay a $250 deposit, after which they gain full access to the immersive courses. So, they go through their chosen program for three months without having to worry about any up-front tuition payments.
After they graduate, they still won’t have to pay for anything until they begin earning a monthly income of $3,333.34, equivalent to $40,000 annually. Only then do they start paying 10% of their income.
If we do the math, a graduate who earns $40,000 annually makes a monthly payment of $333.33. Of course, that changes if he starts earning a higher income. If, for instance, his salary increases to $50,000 a year ($4,166.67/month), that becomes a payment of $416.67 per month.
Students who make less than the minimum income threshold are not obligated to make payments. This ensures that their school or program will only receive payment once the students start reaping the economic benefits of their education.
Participants fulfill the General Assembly ISA obligation once they make 48 payments or pay 1.5 times the funding amount they received—whichever comes first. If the payment window—that is, 96 months—ends before a participant has reached one of those obligations, and the participant has remained in compliance with the ISA, the contract expires.
For Annie, it was this payment structure that encouraged her to opt for the ISA program. “What put me at ease was knowing that the ISA was attached to the school. So, in a way, that put pressure on the school to make sure I succeeded,” said Annie. It helped that the terms were presented to her up front.
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“I thought ‘There’s got to be some catch…” said Annie. “But, the agreement was pretty straightforward. And [General Assembly’s] finance department, compared to most colleges, was surprisingly very helpful.”
Navigating the Course
“I loved it. I loved the creativity it gave me and the different challenges I got along the way. The more I solved challenges, the more I got into it. It was kind of like a high. I just kept wanting to learn and do more,” she said.
While she enjoyed the program, Annie was quick to point out that it wasn’t all fun and games. “Having to learn so much in just three months was very challenging,” she said. “But it was also very rewarding.” By the end of it, Annie had created three full-stack websites.
“Now that I look back, I realize that there was a lot of information that I had to take in. So, knowing that I was able to create something so massive and responsive is mind-blowing. All the lessons that I learned in those three months, they all fit together,” she said. “It even got me thinking, ‘What else can I do?’”
While uncertainties do abound when reviewing financing options, it’s unfair to sell the ISA model short and even worse to misrepresent it. An ISA is anything but restrictive. In reality, while it still incurs debt, the ISA loan is a useful alternative for students who wish to attend coding bootcamps and other skill-specific schools, which are often ineligible for federal aid. Students who can’t afford to pay up front or take out higher-interest private loans can pay for their education via an ISA loan.
“In retrospect, taking the ISA allowed me to focus on the course, instead of the cost. And especially during a pandemic, it was great not having to worry about paying for the course on top of other bills I had to take care of,” said Annie. “If it weren’t for that, I probably would’ve given up early in the program.”
Annie’s payment starts in February of next year. While she admitted to wanting to keep her full paycheck, Annie doesn’t begrudge General Assembly for benefiting from her success. “They gave me a long grace period. I thought I was going to have to pay as soon as I got the job and hit the income threshold.”
“So, I am thankful for the way they did it because it gives me a chance to be smart with my finances. Come payment time, I won’t be completely stressed about it. And honestly, the percentage they take from my income is really not that big.”
“It’s a fixed amount. It has no interest that accrues. The contract even states the cap on what I have to pay. It’s a huge difference from traditional loans where you [might] spend years paying thousands of dollars, and that’s in interest alone.”
Paying It Forward
Asked if she would still be in the same place if she made different choices, she had this to say: “I believe I would’ve eventually gotten here. But it would’ve taken me a hell of a lot longer. Every day I wake up and I still can’t believe that I reached this point so quickly.”
What’s next for her? While Annie seeks to climb the career ladder and become a lead engineer, she also envisions herself doing something deeper. “I want to get to that point where I’m teaching in one aspect or another,” she said.
“I want to give back to the industry and help as many people as I can. I wouldn’t be here if it weren’t for the people who helped me along the way. To that end, I want to be an advocate for this industry. I know I’ll get to that point,” said Annie. “I will be here for a while.”
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