Discover the workings of an Income Share Agreement, understanding its intricacies and how it functions. This post provides a comprehensive guide to the mechanism of this financial model.
Since App Academy was founded in 2012, we’ve committed to a mission of increasing access to software engineering careers.
“There are over 100,000 unfilled software engineering roles open in the US each year. A big reason for that is that there are significant barriers to entry — financially, culturally, and otherwise. We wanted to change that [with App Academy’s tuition philosophy]” says App Academy CEO, Kush Patel.
“We want to empower people who are looking to enter this industry, no matter who they are or where they’re from, to gain access to high-paying positions. That’s why we were the first school to reverse the incentive structure of education by charging students only if they find a job.”
Patel says, “Aligning student’s incentives with our own has been our philosophy since the day we started App Academy and it continues to be a foundational piece that all of our courses are built on.”
To ensure that App Academy’s incentives are aligned with its students’, we charge no upfront tuition until you’re hired and earning at least $50,000 per year in total compensation. If you’re not hired after completing the program, you owe App Academy nothing – literally, $0. For people used to the traditional education’s high upfront tuition costs and no guarantee afterwards, you might be wondering how this all works. It starts with something called the Income Share Agreement (ISA).
What is an income share agreement (ISA)?
In short, an income share agreement is a financing option between a school and a student where the school covers the upfront cost of the student’s education, and in exchange, the student agrees to pay back the school a percentage of their income for a fixed number of years.
ISAs have grown in popularity over recent years in the bootcamp and trade school spaces. Traditional 4-year universities are following suit as students seek other options besides taking on student loan debt.
How income share agreements work vary by the actual institution, as every program boasts different tuition rates. Most, if not all, allow the student to complete their course for free (or for a small sign-up fee) and begin making monthly payments so long as a particular income threshold is met. Despite slight variations, it is a shared perspective that an income share arrangement truly seeks to align student success with school success.
How does an ISA work for App Academy tuition?
Once admitted to our 24 Week Software Engineering Immersive program under the ISA tuition plan, you will pay zero deposit and zero in tuition to begin your program.
After you’ve successfully graduated from the program, you’ll begin the job search process guided by our coaching team and (hopefully!) land your dream job as a Software Engineer.
So long as you are making an annual salary of at least $50,000, you’ll pay back tuition in monthly installments equal to 15% of your monthly income. You’ll continue making these payments for 36 months or until you’ve reached the ISA maximum of $31,000 — whichever comes first.
This is the preferred model for most of our students and in an effort to increase access to our ISA, there are no income or credit score requirements for eligibility. In 2020, over 75% of graduates chose the income share agreement option.
For alumni Mark Mullan, it was important to align his own success with that of his bootcamp. This is why he wound up at App Academy:
“For me, the ISA was the biggest differentiator when I selected a bootcamp. It allowed me to de-risk my career switch, and gave me full confidence that the curriculum would be filled with in demand skills. It also made me feel like App Academy’s financial interests were 100% aligned with my own, and the more that I succeeded, the more they would as well.”
In the event that you complete the course and have not found a job earning at least $50,000 within 3 years, you are not charged any tuition for the program.
Other schools finance their ISAs. Does App Academy?
App Academy introduced the Income Share Agreement (ISA) to the coding bootcamp industry in 2012. Prior to App Academy’s success, no commercially sustainable ISA program had ever been launched. The difference was App Academy’s consistent ability to deliver strong job outcomes to our graduates, year after year.
While providing an exceptionally compelling value proposition to the student, the ISA poses working capital challenges for schools. To ensure that App Academy can expand access to all qualified candidates who want to enroll, as of 2021, we’ve partnered with third party financing institutions that allow us to borrow funds, using the ISAs as collateral. This allows us to reach more people, while retaining all of our commitments to our students and staying true to our mission of only succeeding when our students do.
Almost all schools that offer ISAs partner with third parties to finance the contracts. This is a very common practice that helps schools manage the cash flow timing mismatch caused by the ISA. If you want to learn more about ISA financing, please see our FAQ.
Conclusion: Make the right choice for you and your future
App Academy has a variety of tuition options that give students everywhere an opportunity to access a life changing education.
If you are considering a bootcamp and have questions about the best way to pay for your education, talk with one of our admissions specialists who can walk you through every option, from our ISA, to Deferred, and Upfront tuition plans.
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