Why we don't do income sharing agreements

Having one of the lowest tuitions of all on-site coding schools worldwide, we are proud to not offer an income sharing agreement (ISA). I think we can all agree that student debt sucks. We wanted to address some questions that we have had from our students in terms of if we offer student loan agreements; we don't. Most schools that offer these agreements are backed by big financial companies and we are sure your tuition will be at times, double than what we charge even before you sign an ISA. An article in Forbes found out that a student that took out $10k worth of an ISA if borrowed over 10 years, your loan would be around $23,800. That's a lot more than the 10k you paid. Consider that our programs are under $7k, we can happlier say that our program won’t put you through any big student debt.

The Math Of An ISA (from Forbes)

Consider an example: A student takes out $10,0000 worth of ISA funding. They land a job with a starting salary of $30,000. The ISA payback is 7% of their income for 10 years. This means $2,100 for each year the student makes $30k. If after four years, the students salary jumps to $34k and then $38k after another four years, they will pay back far more than the amount borrowed. Below is a breakdown of the payback:

Year 1: $30k @ 7% = $2,100 Year 2: $30k @ 7% = $2,100 Year 3: $30k @ 7% = $2,100 Year 4: $34k @ 7% = $2,380 Year 5: $34k @ 7% = $2,380 Year 6: $34k @ 7% = $2,380 Year 7: $34k @ 7% = $2,380 Year 8: $38k @ 7% = $2,660 Year 9: $38k @ 7% = $2,660 Year 10: $38k @ 7% = $2,660 For a total of $23,800. You might say that is absurd and yes - it is. But know that many ISAs do cap their total payback at 2.5X the loan amount.

In this scenario, the additional $13,800 is basically “interest” and is completely within the 2.5X cap. If your salary rises enough, that 2.5x cap could make you repay $25,000 in total to borrow $10,000. That's effectively a 22.25% APR on your loan. That's expensive.

Tyler Pennell