Do Bootcamps Even Need Title IV Funding?

The vast growth of the technology sector has led to an increased demand in qualified workers who have the skills necessary to fill jobs. A 2018 study by Code.org found that there are currently around 500,000 open computing jobs across the United States, and the sector is expected to grow significantly as new technologies such as artificial intelligence emerge. The technology sector has growth so quickly that traditional universities have failed to produce enough workers who have the skills necessary to work in the industry. One new approach to further education aims to address this gap in the technology sector, and, to a larger extent, vocational skills in general: coding bootcamps.

The Rise of Coding Bootcamps

Coding bootcamps are short, hands-on training programs that aim to help students acquire the skills they need quickly and break into a job in a certain industry. These institutions are focused on preparing their students for working, and so often incorporate significant career development opportunities — mock interviews, resume education, introductions to hiring managers, et cetera — into their programs. Bootcamps, unlike traditional colleges, are less restricted in terms of regulation and compliance, which means that they have been able to innovate at a quicker pace than traditional higher educational institutions. More bootcamps are starting to offer online programs, which allows them to deliver a high-quality education at scale — thus achieving economies of scale and reducing costs.

Indeed, bootcamps have taken pride in developing streamlined operations. Bootcamps are not interested in hiring dozens of administrators for each student, or providing extravagant student experiences by the way of sports teams or lazy rivers. These institutions have also started to become more focused on incentive alignment, as they aim to position themselves as a viable alternative to college. As these institutions continue to grow, there has been speculation over whether they should be allowed access to federal financial aid. But perhaps the question we should be asking is: do bootcamps even need federal aid?

The market for bootcamps, especially in the coding sector, has been quickly growing over the last few years. In a 2018 study, Course Report estimated that over 20,000 people would graduate from a coding bootcamp that year, and found that bootcamps are a $240 million industry. More companies are entering the space, and institutions like Lambda School and Thinkful have started to develop new and innovative approaches to education which has encouraged more people to consider a bootcamp over traditional educational paths. The best coding bootcamps are also achieving their goal of producing job-ready graduates, and many of them boast high outcomes rates in reports conducted by the Council on Integrity in Results Reporting.

The Dangers of Title IV Funding for Coding Bootcamps

There has been an ongoing debate over whether bootcamps should be eligible for Title IV funding — which refers to the section of the Higher Education Act that covers federal student aid, such as loans and Pell Grants. The Education Department has, over the years, exposed an interest in how coding bootcamps could become Title IV eligible, although most attempts have failed. Indeed, making bootcamps Title IV eligible would allow anyone to access federal aid to pay for their bootcamp. Such a change may encourage more people to attend bootcamps, too, as there would likely have to be measures taken by the government to audit the quality of these institutions — akin to how accreditation works in traditional higher education. On the other hand, Title IV funding could lead to the federal government becoming too involved in bootcamps, which could stifle innovation and cause them to become the next universities.

Accreditors Could Stifle Innovation

Traditional college, unlike coding bootcamps, is not a free market. The federal financial aid system was designed to support millions of Americans in pursuing further educational opportunities in colleges and universities. However, Title IV funding is only offered to a certain group of institutions, which leaves other institutions with a strong competitive disadvantage. Title IV funding has also resulted in many bad actors being able to sustain themselves for years, despite low outcomes, because of systemic issues in how these institutions are evaluated.

In higher education, schools are evaluated by accreditors — organizations which independently verify the quality of a school’s education. Schools that offer Title IV funding must pass a study by an accrediting body in order to be eligible for federal financial aid. However, the accreditation system is inefficient and incompatible with the business model of bootcamps. Accreditors are focused more on the inputs of schools and their financials, rather than their outcomes. The original design of these institutions means that minimum standards on student outcomes do not exist, and the decentralized nature of the system means that rulings for different schools can differ depending on where the school is located. Although accreditation bodies should focus on student outcomes, this is unfortunately not the case.

If Title IV funding were to be extended to bootcamps, then the existing measures of evaluating schools would also be applied to bootcamps. Accreditation bodies have no experience in evaluating bootcamps and their unique business model that renders obsolete many elements of traditional higher education. Bootcamps have been outcome-driven from the get-go and are focused on creating workers who are job-ready in an accelerated time frame, in contrast to traditional higher education where the aim is solely to educate and “enrich” students. Bootcamps may have to radically change their offerings in order to comply with accreditors’ evaluation criteria, which could eliminate some of the innovation in the space. Title IV funding would likely increase diversity in bootcamps, as more people, especially those from low-income backgrounds, could request money from the federal government to pay for their education. However, new evaluation criteria may end up stifling some of the core elements of bootcamps that makes them so attractive.

Income Share Agreements Are on The Rise

Making bootcamps Title IV eligible may also be unnecessary, due to the rise of alternative funding models in the bootcamp sector. Bootcamps can be expensive — often between $10,000 and $25,000 — which makes them hard to access for many groups. But, coding bootcamps have started to address this problem by offering Income Share Agreements, or ISAs. Through an ISA, a student will pay no upfront tuition and instead agree to share a percentage of their future income after graduation. If the student does not earn over a certain amount, then they will not have to make contributions toward their ISA. Therefore, if a student becomes unemployed or underemployed, they will not have to pay for their education. Conversely, if a student is very successful after graduation, the total payments they can make is capped to ensure they do not pay disproportionate amounts for their education.

ISAs can help align the incentives of schools and their students, as the financial success of schools will depend on the outcomes of their graduates; the more people who succeed, the more money the school will make. If a school does not provide a high quality education and fails to render job-ready graduates, they will realize a direct impact to their financials. Over 40 coding bootcamps are now offering ISAs as an alternative form of financing. Lambda School, a nine-month coding bootcamp which provides an education in fields such as data science and full-stack web development, allows students to share 17 percent of their income for two years rather than pay upfront for their education. Students do have the option to pay $20,000 upfront if they would prefer. Through this model, the school’s success is linked to the success of their students — if Lambda’s graduates do not succeed, they will pay back less to the school.

ISAs have already opened up opportunities for thousands more people to attend coding bootcamps. ISAs allow people to pursue further education opportunities without having to worry about the constraints of financing — students do not need to pay any money upfront. This is especially impactful in the context of low-income students or students from minorities which, typically, have less wealth. These students can attend a coding bootcamp and learn the skills they need to thrive in the modern workforce, and pay for their tuition after they have earned a well-paying job. If fewer students are having to pay for their education upfront, then Title IV funding may not be necessary.

Where Are Coding Bootcamps Going?

The future of bootcamps is strong. These institutions are creating lean and effective methods of educating people and preparing them for jobs. This is in contrast to the traditional model of higher education, where students study for two or four years, and then are largely left to find a job by themselves. The admissions scandal from earlier this year highlighted many of the systemic problems in higher education, and showed that the system has been increasingly reliant on prestige rather than outcomes to continue to operate. Universities are continuing to invest billions in bigger campuses and better sports teams, but those are not requisite components of providing someone with a high quality education. Bootcamps are solely focused on educating students, and helping them get hired.

Although most activity in the bootcamp industry has been confined to short-term training programs in coding, bootcamps may in the future expand into other areas such as finance in healthcare. This would give people even more options in terms of pursuing higher education — colleges would no longer be the only viable option for people interested in these industries. Coding bootcamps do have a lot of challenges to face, and will have to continue innovating to convince more people of their viability. However, how students finance their education at a bootcamp may no longer be a problem. The rise of Income Share Agreements and outcomes-based funding has meant that offering access to Title IV funding for bootcamps is no longer necessary. Indeed, doing so may stifle innovation in the industry and result in unqualified and unprepared accreditors having too much authority over how these institutions operate. Perhaps Title IV is not needed at all in coding bootcamps.