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Income-Share Agreements Are on the Rise. Do They Work? #MakerEducation

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In her new piece in The Atlantic, Lindsay Gellman explores the income-share agreements that some coding schools have adopted in recent years.

Last year, Lavell Burton decided he wanted to learn to code. He searched online for coding bootcamps, and was surprised to find that many of them cost several thousand dollars upfront. Burton, then 36, was hoping to move from his maintenance job aboard an American naval ship to a career in software engineering in California, where he grew up. He finally came across a 30-week remote program, Lambda School, that was free to attend. The program would provide comprehensive web-engineering training, and would help with job placement. Once employed, graduates would be required to pay back a set portion of their salary under an arrangement called an income-share agreement, or ISA.

Burton made it through Lambda School’s rigorous selection process, including an entrance exam covering math and logic. By last fall, he was back in the Bay Area, where he moved in with his ailing grandmother and prepared to begin classes. “They’re taking a chance on me,” Burton remembers thinking of Lambda School. “If I win, they win.”

The concept of ISAs has been around since at least the 1950s, when the economist Milton Friedman outlined them as a hypothetical model of repayment. Yet ISAs were rarely implemented until the past few years, as student-loan default spiked and schools sought to offer other ways to pay. In 2016, Purdue University launched an ISA tuition option aimed at families who might otherwise take out high-interest private loans or Direct PLUS loans for parents to fill the gap between federal student loans and the cost of tuition. Purdue hired Vemo Education, a for-profit startup, to help design and administer the program, which is largely backed by the university’s funds. The private schools Clarkson University and Messiah College have since announced plans to follow suit, as has the United States Collegiate Athletic Association, which has partnered with Vemo to create ISA options for its roughly 80 member schools.

Read more.


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