As 2018 came to a close, Hamilton Young decided that he wanted to learn how to code. Prior to this, he was working as a personal fitness trainer—something that he’d been doing for nearly two years. Hamilton enjoyed the job, but he still felt that something was missing in his career. As he put it: “I didn’t hate it. It just wasn’t mentally challenging for me. I wanted more.”
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So, he quit his job and signed up with a coding bootcamp. He planned to learn the fundamentals of programming in a short span of time. Halfway through the program, however, he dropped out. Hamilton wasn’t new to this. Years before, he had a similar experience while studying at a community college. Only this time, the stakes were higher. “I left my job to learn how to code. And although I wasn’t struggling, I didn’t have a ton of money,” he said. He had to find a way to make it work.
Then came Kenzie Academy, an Indianapolis-based school that offers on-campus and remote training in software and UX engineering. For Hamilton, two things stood out immediately. One, the school fostered a different learning structure that set it apart from bootcamps and traditional colleges. “It didn’t feel like a school but a thriving startup community,” he said.
But, as most students can relate to, Hamilton was wary about how much it was going to cost. Securing a source of financing was imperative to get him fully on board. This was where the second feature came in.
Kenzie Academy’s curriculum is built around a “Code now, Pay later” policy. That is, students do not pay tuition up front, save for a $100 commitment fee. After that, students gain full access to the training program. In exchange, they agree to pay their debt via a fixed portion of their future paychecks up to a maximum amount or number of payments.
As a protection, they only make payments when their monthly earnings hit a specified minimum income threshold. Their obligation expires after a fixed number of months. This applies even if they paid less than the funding amount they received. This arrangement falls under what is otherwise known as an income share agreement (ISA) loan.
The ISA model is not a novelty. In fact, it’s been gaining traction over the years, especially among coding bootcamps and trade schools. To give a clearer picture of how it works, let’s take Kenzie Academy as an example.
For this school, graduates earning at least $3,333.33 per month (around $40,000 per year) are subject to pay 13% of their monthly income. The payment window is open for 48 months, or until they hit the payment cap. Below the minimum income threshold, graduates pay nothing.
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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.
So, suppose a student, Aaron, signs up for the school’s Software Engineering program and agrees to pay his tuition with an ISA loan. If after graduation Aaron lands a job with a starting salary of $45,000 per year, the ISA will take effect.
Using Kenzie Academy’s terms, Aaron will be obligated to pay $5,850 annually, or $487.50 a month. Regular payments will be made within four years, or until he hits the cap. Payments adjust in real time.
That is, while the percentage of income Aaron will pay remains constant, the amount he’ll pay will increase or decrease relative to his income. If at any moment Aaron loses his job and lands a new one that pays less than $40,000, his ISA obligation will be deferred until he once again hits the threshold or the payment window closes.
That safety net, for Hamilton, was what sealed the deal.
Off the Beaten Track
Since it took off, the ISA loan model has been heralded as an alternative path to traditional student loans. Student loans have become ubiquitous in the United States. They have been the go-to option for students who are unable to support their education through savings or salary alone. So ubiquitous they are, in fact, that around 45 million Americans are now sitting on nearly $1.6 trillion of student debt.
An impact survey conducted last year revealed that six in 10 of the 1,000 borrower respondents, equivalent to 61%, only managed to save at most 10% of their monthly income due to their loan obligations. Twenty percent of the respondents had nothing to save at all.
It doesn’t stop there.
Earlier this year, the New York Times published a story titled “Retired, or Hoping to Be, and Saddled with Student Loans.” The article highlighted how American senior citizens actually make up the fastest-growing group of student loan borrowers. “I’m convinced I’m going to die before I resolve this,” told 55-year-old Kimberly Weihl.
Beyond the numbers and the headlines, the student debt crisis, for Hamilton, hit closer to home. Although he never took out a student loan, almost everyone he knows had. “I was fortunate enough not to be saddled with student loans.”
“I paid off my college tuition upfront through the help of my parents and some of the money that I was making from my work,” he said. His brother wasn’t so lucky. At the age of 34, his brother is just coming to the end of the student loans he took out years ago.
“My friends have student loans and they have to pay that back whether they have a job or not,” Hamilton added. “Some of them chose to live in less expensive parts of the city just because they have these loans hanging over their heads.”
The ISA loan route allowed Hamilton to break away from that cycle. While ISA loans still incur debt, that debt is designed to be more manageable, and have a built-in end date. More importantly, he was able to concentrate on his training with the burden of student loans off his back. He spent the first six months of the program learning about user experience (UX) and user interface (UI) design, both of which are crucial elements in the field of web development.
He then spent the second half of the year training for front-end development. Exactly a year after signing up for the program, Hamilton broke into the tech industry.
Where’s the Fine Print?
Hamilton completed Kenzie Academy’s UX Engineering program at the beginning of this year. Four days later, he secured an interview with Archon Tech Strategies, a company that develops and installs software and applications for various industries. He launched his career as a UX/UI Designer during the last week of January, only two weeks after getting certified.
“Right now, we have in-house security software that we’ll soon be sending out to clients. And I designed most of its features,” said Hamilton. His situation paints a stark contrast from someone who, two years ago, did not have a lot of financial stability to show for.
“I’m a skeptical person by nature. I had doubts before I took an ISA. Even before I received the call from my current employer, the thought of getting a job so quickly after a year of training—which I had not even paid for yet—seemed too good to be true,” he said. “I thought to myself, ‘There’s got to be a fine print there somewhere.’”
And was there? He doesn’t seem to think so.
Eight months into his job and Hamilton has not encountered any unwelcome surprises along the way. “I’ve made my payment every month and it’s at the exact rate that they said I’d be paying based on my income. Of course, I would love to see that moment when all the money I’ve worked for stays in my bank account. But right now, I can say that committing to the training was absolutely worth it.”
Hamilton proudly looked around the new apartment he had recently moved into. “I know that the only reason I got here was that I got this job. And I was able to do so because I had the opportunity to go to a school that taught me the skills and knowledge that I would need to grow.
“For me, taking the ISA route was freeing. Unlike my friends who are burdened with loans, I don’t think the amount I’m paying is daunting,” he said.
“I’m not eating ramen every day.”
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