Tiffany Wise had a plan. That was to finish her bachelor’s degree in computer science and start a career in software engineering. But after making her way through the four-year degree program and taking out a traditional student loan to cover the costs, life happened. Tiffany’s mother fell ill, prompting her to pause her plan and care for her mother.
That was three years ago.
This year, Tiffany is determined to make her way into the tech industry and become a professional software engineer. Helping her get there are San Francisco-based software engineering training school Outco and an income share agreement.
Tiffany Upskills in Software Engineering
In the age of automation, the new norm is to upskill or perish. Tiffany knew that to secure a software engineering role, the skills and knowledge she picked up from three years ago would not suffice. Rather, she would have to catch up with the new tools, technologies, and techniques of the trade.
She found Outco, a training school that offers a four-week accelerated program for aspiring software engineers. Unlike coding bootcamps, Outco doesn’t teach software engineering from the ground up.
Instead, the school focuses on equipping students with critical job search skills so they can articulate and demonstrate their software engineering skills during technical and behavioral interviews.
The school appealed to Tiffany for two reasons.
First, she already had a sound understanding of the field and even had a portfolio of projects to prove her skills. What she needed was a program that would help her build upon these skills and help her accelerate her job search.
Second, the school offered a financing option that would allow her to complete her training without paying upfront provided that she agreed to pay a percentage of her income later on.
This financing option is called the income share agreement.
What Is an Income Share Agreement and How Does It Work?
An income share agreement or ISA is a type of loan that binds a school to provide training without up-front payment. In exchange, the school gets a fraction of the student’s future gross earnings over a set period, so long as the student’s salary lies within a specified range.
The main point of an ISA loan is two-tiered. First, it steers students away from having to pay thousands of dollars at once or incurring traditional student loan debt to get the training they need to advance their careers. Second, it can incentivize the school to step up and make sure its students are equipped to enter the workforce.
How Do You Fulfill an Income Share Agreement?
An income share agreement will remain binding until one of three conditions are fulfilled—whichever comes first:
- You’ve paid the maximum amount, the “payment cap”
- You’ve made the maximum number of monthly payments
- Your ISA’s payment window has closed
What Do I Need to Know About Income Share Agreements? A Glossary of Key Terms
Different income share agreements come with different terms and conditions. In this section, we’ll break down income share agreement terms to help you get a better grasp of what you’ll need to evaluate when considering this financing method.
Note that the following terms are what you’ll commonly come across when considering an ISA. Depending on the program, the ISA you’re considering may have some or all of the features below.
Most ISA providers give you a few months to search for a job and organize your finances before the payment period begins. This helps ease the pressure of having to secure a job immediately after graduation and make payments.
Minimum Income Threshold
For most ISAs, payments only kick in once you’re earning above a certain monthly gross minimum income threshold. As long as you provide adequate documentation that you’re unemployed or earning below the threshold, your ISA will remain paused until your pre-tax income rises above the threshold.
If your gross monthly earnings are under the threshold for some time, you could pay less than the amount you received to finance your education. Alternatively, if your earnings are above the threshold, you could pay more than the amount you received—up to a maximum amount called the payment cap.
As part of the agreement, you’ll need to submit proof of employment (and income) or unemployment to your school’s ISA provider as stipulated in your contract.
Qualifying for deferment means you won’t have to make ISA payments while your ISA is paused. Deferment eligibility varies by program, so be sure to check yours. Here are a few scenarios that could qualify you for deferment, depending on your program:
- You are unemployed. You’ll just have to submit the proper documentation to your ISA provider.
- You have a job, but it doesn’t pay above the minimum income threshold. Most ISA providers have this clause, although few, like Outco, do not. Again, you’ll have to submit documentation.
- You have a job, but it is not related to what you trained for while in school. Most ISA programs calculate your payments based on earnings—not your field of work. But a couple of programs, including Outco, allow you to defer if you’re not working in your field of study.
Income Share Percentage
The income share percentage refers to the fixed percentage of income you pay once you land a job that pays above the minimum income threshold. How does this work?
Say your ISA has a minimum income threshold of $3,333.33 monthly (equivalent to $40,000 annually), and the income share is set at 10 percent of your gross income. This means you’d pay 10 percent of $3,333.33, which is equivalent to $333.33 each month. If you got a raise and started earning $5,000 per month, you’d still pay 10 percent of your income: $500 per month.
The payment window is the period during which your income share agreement remains active. Once your ISA reaches the end of the payment window, the agreement will be considered fulfilled, as long as you’ve remained in compliance with your ISA. That’s true even if you have not made the maximum amount or number of payments.
The payment cap refers to the maximum amount you’ll need to pay to end your income share agreement. So whether you’re only halfway through the payment window or you’ve only made half of the maximum number of payments, your ISA payments will stop if you hit the payment cap.
Outco’s Income Share Agreement: Terms and Conditions
Outco offers two ISAs. The first option stipulates a $0 up-front fee in exchange for 10 percent of your gross monthly income for six months. Your cumulative payment must also total at least $5,500, which is the cost of the program if paid upfront.
The second option commits you to pay a $1,500 deposit before the program begins. Once you land a job post-program, you’ll have to pay six percent of your pre-tax income over three months. Your cumulative payment must be $4,000 or more.
Neither option comes with a minimum income threshold or a payment cap. Rather, the ISAs come with a 30-day grace period and a guarantee: “A job you accept, or your money back.”
“They said they will give you all your money back even if you got an offer but maybe didn’t like that offer. I thought, ‘well that’s an interesting guarantee,’” said Tiffany. “They do have requirements that you have to meet,” she added.
“I have to attend all the lectures and do their resume workshops and homework. There’s also a career mentor that I will work with. There are a lot of requirements, but as long as you do all of them and you don’t like the offer [or get an offer], then you don’t have to pay. That’s how it works. I’m surprised they’re willing to do that but it sounds pretty cool.”
To clarify, Outco guarantees that if you fulfill its participation requirements, you will find and accept a job offer for a qualifying position within one year of starting the program. Otherwise, if you paid a $1,500 upfront deposit, Outco will grant you a refund and your ISA will be rendered complete. If you signed up for the $0 upfront fee ISA and didn’t get an offer for a qualifying position within a year, Outco will likewise waive your ISA.
For a role to qualify, it must be related to tech or software. This means that if Tiffany lands a job outside those fields despite fully participating in Outco’s training sessions, her ISA will be in deferment status until she gets a qualifying position or until the one-year payment window closes.
With this guarantee in mind, Tiffany opted to sign Outco’s first ISA option: pay nothing up front in exchange for 10 percent of her gross monthly income for six months. “I just like not having to worry about it until you can actually afford to pay for it,” she said.
“I can also focus more on learning,” said Tiffany, who is into her second week of the one-month program. “Even though I have a job right now, I feel like I might have to work more if I’m currently paying [tuition] while also trying to learn.”
“I also think that because [the payment term] is only six months, that makes it much better. If it were longer, then I’d be concerned because who knows what other bills might come up. So the six-month window did make me feel a lot better,” added Tiffany.
The Bottom Line
At the moment, Tiffany is working as an ambassador for edtech company Career Karma. There, she welcomes users of the Career Karma app who, like her, aspire to one day work in the tech industry.
Her job entails giving users all the information they’ll need to start their journey toward tech, including presenting them with the coding bootcamps that can help them get the training they need. Even while working at Career Karma, she’s on track to finish her training at Outco within the next month.
Once again, Tiffany has a plan.
“In five years, I want to be a senior software engineer, working remotely. Preferably from a beach. That would be awesome.”
About us: Career Karma is a platform designed to help job seekers find, research, and connect with job training programs to advance their careers. Learn about the CK publication.