Bootcamps have provided aspiring professionals a fast and more affordable pathway to careers, predominately in coding. Their cost and value proposition to students changed significantly with the introduction of Income Share Agreements or ISAs.
Customers are more likely to obtain value from a vendor when the incentives of the customer and vendor are aligned. For example, real estate agents are paid via a commission on the value of the homes they sell. So when selling a home, a real estate agent and their customers' incentives are aligned: they higher the price the house is sold for, the better for both the vendor (the agent) and their customer. This motivates the agent to do the best job they can for their customer.
Historically in post-secondary education this has not been the case. The major goal for students in going to college is to get a good job. But colleges charge students tuition whether or not any job is obtained.
Bootcamps innovated a new model with ISAs: in this model, the bootcamps only get paid if and when the student gets the desired outcome: a high-paying job. If the student successfully obtains the job, then they pay the bootcamp a tuition, little by little over time so that they can afford it from their new—much higher—paycheck. If the student does not obtain the desired outcome, i.e. a high-paying job, then the bootcamp is not owed anything.
This arrangement has big benefits for the student. First, it significantly reduces risk. The worst-case scenario (which unfortunately many, many college grads experience) is to pay a tuition but not obtain a high-paying job. The ISA eliminates this risk.
Secondly, the ISA aligns the incentives of the bootcamp and the student. The bootcamp is not only interested in training the student, but is very motivated to ensure the student achieves the outcome of the high-paying job. This pushes the bootcamp to not only provide the right training but to also recruit employers who will provide the jobs to students.
Example ISAs and Prices
|Tuition if Paid Upfront||$17,980||$22,500|
|Income Share %||10%||17%|
Both Galvanize and Lambda allow students to pay their tuition upfront should they wish to. But both offer ISAs (which most of their students elect to use).
Students do not pay anything to the bootcamps if after graduation they are not making more than the threshold annual salary amount. If they are making over that threshold, they pay an income share percentage of their salary back to the bootcamps. They continue to make such payments—as long as they continue to earn above the salary threshold.
Through the implementation of this ISA models, bootcamps have radically improved the value of their offerings to students by reducing financial risk and aligning student and school incentives on the same outcome: landing a high-paying, career-launching job.
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