Income Sharing Agreements (ISA), a contract wherein a student’s tuition fee is paid or covered by a lending party in exchange for a percentage of his/her future salary for a defined period, is gaining popularity across the United States. With the IT industry offering one of the most stable and high-paying jobs, it’s no surprise that more and more coding boot camps are welcoming and applying this concept.
For a typical coding Bootcamp setup, ISAs usually operate like this: an individual will be allowed to start the program with little to no payment at all. After the student successfully graduates from the boot camp and gets his or her first tech job, he or she will then be required to pay 10 – 15% of his or her salary for 2-4 years.
This may seem like an advantageous option at the beginning, but these top 4 disadvantages may outweigh the perks:
1. It’s Unnecessarily Overpriced
When you compute ISAs compared to traditional federal and private student loans, ISAs, in the long run, seem to be an overpayment for most programs. Since you won’t be able to determine the exact amount of your future salary, you can only agree to how many percent of it you’ll be paying. In addition, while ISAs claim to be free of interest, the fixed percentage it will require from your salary will not be adjusted if you get a raise during your payment period unless it reaches the set payment cap. It is important to always remember that investors in ISAs are here to make money more than to be of help. As Ed Surge writes, ISAs are highly prone to deceptive marketing and predatory lending terms.
2. It’s Still Highly Unregulated
The risk gets higher for interested applicants since to this day, ISAs are still largely unregulated by the federal government and the states due to the concept being relatively new. Long-term financial commitments should be subject to protection laws to prevent lenders from abusing the agreement. If any crippling issues arise, students who participated will have weak to no grounds to support and defend their side. A great example of this is the claim of ISAs that they are an alternative to loans. The Consumer Financial Protection Bureau, later on, opposed this, stating that ISAs are indeed a type of student loan.
3. You May Be Subject to Discrimination
The inconsistency in the set standards of who will be eligible for ISAs makes interested individuals subject to discrimination. For instance, an ISA for one person may have different terms than with a different person. In fact, a study from the Student Borrower Protection Center revealed that those who attended historically Black colleges and universities paid more than those of other racial backgrounds. This makes the success stories of ISA participants less credible.
4. Better Options Exist
Aside from traditional student loans that are seemingly cheaper and safer, there are also other better options such as Tuition Reimbursement Guarantee which EdTech companies like Yellow Tail Tech offer. Comparatively, for a fraction of the price you’ll pay in total for usual ISAs, Yellow Tail Tech summarizes this policy as follows: If you don’t get a job five months after your program completion, Yellow Tail Tech will refund you the full amount of your tuition. Learn more about our Tuition Reimbursement Guarantee here.
To date, the program has yet to reimburse any student. Learn how Yellow Tail Tech has our students’ best interests in mind and how we secure their confidence in the program’s ability to produce job-ready graduates. Book a 10-minute intro call with our Enrollment Advisor and get started on your IT career journey!