Breaking Barriers: How Income Share Agreements are Expanding Access to Tech Education
The rising cost of higher education and growing student debt crisis have put the dream of a degree out of reach for many Americans, especially those from disadvantaged backgrounds. Over the past 30 years, the average cost of attending a public four-year college has nearly tripled, and student loan debt has ballooned to over $1.7 trillion.
This burden falls disproportionately on lower-income, Black, and Hispanic students. According to the Brookings Institution, 55% of Black student borrowers and 40% of Hispanic borrowers are behind on their loan payments, compared to 29% of white borrowers. Women hold nearly two-thirds of all outstanding debt.
As traditional education pathways have become less accessible, alternative models like short-term coding bootcamps have emerged to help close the tech skills gap and provide a more direct path to high-paying jobs. Course Report estimates that nearly 25,000 students graduated from coding bootcamps in 2020 despite the pandemic.
But even these programs, with an average upfront cost of $14,000, are out of reach for many aspiring students without taking on debt. Enter the Income Share Agreement (ISA). ISAs provide a pathway to gaining in-demand tech skills for driven students by shifting the cost burden and risk away from the individual and tying repayment to outcomes.
How Income Share Agreements Work
An ISA is a financial contract where a student receives education funding from their school or a third party in exchange for agreeing to pay back a set percentage of their post-graduation income for a fixed period of time. Repayment is contingent on the student securing a job with a salary above a minimum threshold.
ISAs typically cap the total amount that can be paid back, and all obligations end after a certain time period even if the full amount hasn‘t been repaid. The specific terms vary between programs, but the basic structure aligns incentives between the student and education provider to promote successful outcomes.
For example, Lambda School offers an ISA where students pay nothing upfront for its 6-12 month online programs in web development, data science, and UX design. Once they land a job earning at least $50,000 per year, they pay back 17% of their monthly income for 24 months, capped at a maximum of $30,000 total.
In contrast, under a traditional private student loan, monthly payments are fixed regardless of income, and interest continues to accrue over longer repayment terms, which can be as long as 20 years. Federal loans offer somewhat more flexibility with income-driven repayment plans, but students are still responsible for paying the full amount plus interest.
| Comparison of Loan vs. ISA for $15,000 Tuition | ||
|---|---|---|
| Private Loan at 7% APR | ISA at 17% of income for 2 yrs | |
| Repayment term | 10 years | Up to 2 yrs (if income > $50K) |
| Monthly payment (based on $75K salary) | $174 | $1,062 |
| Total paid | $20,893 | $25,500 (capped) |
| Repayment obligation if no job / low income | Yes | No, only above min. threshold |
While the ISA recipient may end up paying more in total compared to a traditional loan, they are protected against the downside risk of debt if they don‘t secure a well-paying job. This peace of mind can be well worth the tradeoff, especially for students from less affluent backgrounds or without existing safety nets.
The Growth of ISAs in Tech Education
The concept of ISAs has been around since the 1950s, but they have gained traction in recent years as a funding solution for tech skills training programs. Coding bootcamps like Lambda School, App Academy, General Assembly, and Programming School have been at the forefront of ISA adoption.
According to Career Karma‘s 2020 State of the Bootcamp Market report, about 15% of coding bootcamp students used an ISA, up from just 6.2% in 2019. And a growing number of universities including Purdue, Colorado Mountain College, and University of Utah are now offering ISA programs as well.
"ISAs have gained popularity as the traditional education financing system has broken down. Young people are increasingly unwilling to take on debt for education without a direct path to a good job," said Dr. Ian Shoefly, economics professor and ISA researcher. "By tying repayment to income, ISAs better align the interests of students and schools around successful career outcomes."
This alignment of incentives is leading to innovations in curriculum design, career services, and student support as education providers are financially motivated to do everything possible to help students succeed in the job market.
"With skin in the game, schools offering ISAs are investing heavily in career coaching, employer partnerships, and post-graduation support to a much greater extent than we typically see in higher ed," noted Dr. Felicity Hornbeck, education policy expert. "ISAs could ultimately drive a shift towards more outcomes-focused, ROI-driven education models."
How Programming School‘s Access ISA is Increasing Diversity in Tech
Programming School, a coding bootcamp acquired by WeWork in 2017, has been a pioneer in the ISA space. They launched their Access ISA program in 2019 to increase access to their immersive Software Engineering, Data Science and UX/UI Design courses.
The Access ISA allows students to enroll at Programming School‘s campuses in major tech hubs like New York City and San Francisco for no upfront tuition. After graduation and once they land a job earning at least $40,000, they pay back 10% of their monthly gross income for 4 years, capped at $31,000 total. If they don‘t find a job within 6 months, they pay nothing.
"The ISA model is a powerful tool for expanding access and driving more diversity in tech," said Siya Chao, Head of Access and Opportunity at Programming School. "Many of our ISA students are women, people of color, veterans, and career changers who previously didn‘t have a clear path to gaining tech skills. The ISA gives them that opportunity by investing in their potential."
The proof is in the outcomes. According to Programming School‘s 2020 Jobs Report, 48% of their placed ISA graduates were women and 46% identified as from underrepresented ethnic backgrounds. The average starting salary for ISA grads was $72,500.
| Programming School 2020 ISA Graduate Outcomes | |
|---|---|
| Percentage placed in full-time salaried roles within 6 mos. | 71% |
| Percentage of placed graduates who are women | 48% |
| Percentage of placed graduates who are BIPOC | 46% |
| Average starting salary | $72,500 |
| Graduates placed at companies including: | GitHub |
| Spotify | |
| Peloton |
Beyond the numbers, the ISA has enabled inspiring individual transformations. Alejandra Sosa, a first-generation Peruvian immigrant and mother of two, used Programming School‘s ISA to enroll in their Software Engineering program with no prior coding experience.
After graduating, she landed a role as a Solutions Engineer at Slack making over six figures. "The ISA was a lifeline. I simply would not have been able to afford the upfront cost or take out a loan with two young kids to support," Sosa said. "Now I‘m on track to pay off my ISA early and have a fulfilling career that has changed my family‘s trajectory. I‘m so grateful this opportunity existed."
The Challenges and Future of ISAs
Despite the early promising results, ISAs are not a panacea for education access and do present some risks and challenges. Because students who land high-paying jobs may end up paying significantly more than the upfront tuition cost, critics argue ISAs could penalize success and create perverse incentives for schools to only admit students with the highest earning potential.
There are also concerns about ISAs discouraging students from pursuing lower-paying but high social value careers like teaching or nonprofit work. And the lack of a legal framework or standard consumer protections around ISAs leaves students vulnerable to predatory terms or aggressive collection practices.
Lawmakers have taken note, with bipartisan legislation like the ISA Student Protection Act of 2022 introduced to regulate ISA terms and practices. The bill proposes capping the income-share rate at 20%, limiting repayment to 240 months, and banning mandatory arbitration among other guardrails.
Proponents believe smart regulation will help ISAs scale responsibly and ensure positive outcomes for students. "ISAs are still a nascent innovation, but they have the potential to disrupt the broken education financing model and expand access for the most underserved students," said Jake Weston, a higher education researcher at the Brookings Institution.
"By shifting risk away from students and aligning school incentives around quality employment outcomes, ISAs can be a powerful force for making tech training more equitable and accessible – but we have to embed strong consumer protections from the start," he argued.
As ISAs mature, they are likely to evolve and expand across the higher education landscape. In the tech sector specifically, they could help drive the shift to skills-based hiring and create new alternative pathways to jobs for underrepresented talent.
"This is about more than just a new financing model – it‘s about fundamentally aligning education with the needs of the labor market and expanding opportunities for students left behind by the traditional system," said Lauren Ellis, Head of Social Impact at Programming School.
"If we get this right, ISAs can be a sustainable solution for building a more diverse and equitable tech workforce that benefits individuals, companies and the economy as a whole. That‘s the real promise and potential here."
