You Don't Pay Back Coding Bootcamp Tuition Until You're Making at Least $40K a Year
October 3, 2017
Michelle Caffrey, Reporter, Philadelphia Business Journal
Monday marked the first day of school at the New York Code + Design Academy’s Philadelphia location, where 25 students will begin an intensive,12-week web development course that costs $15,000.
None, however, will pay for it — until they’re making at least $40,000 a year.
The NYCDA launched its Income Sharing Agreement program this week after a review by the state of Pennsylvania gave it a green light to move forward. Since regulatory approval is pending in New York and Washington, D.C., Philadelphia and Salt Lake City are the only two cities where the NYCDA’s deferred tuition program is available.
While its model isn’t unique nationwide, it is the first of its kind in the region, which is home to a growing technology scene but looming tech talent gap, as well as the highest poverty rate in major U.S. cities.
A report from The Economy League released in May showed that there’s an increasing need to fill tech positions in the region, but a lack of skilled workers here that can take on those jobs.
By offering access to training for in-demand jobs that can bring an average starting salary in the $60,000 to $70,000 range with no upfront costs, Founder and CEO Jeremy Snepar is hoping the model will break one of the biggest barriers to enter the field, especially for underrepresented minorities.
“We’re essentially saying ‘If you have the talent, the passion and the commitment, we have the opportunity and the skills for you to go out and get that job in tech,” Snepar said. “Especially in Philadelphia, what the market needs is someone to believe in the talent that naturally exists here. We’re trying to be the bridge to connect talent to jobs.”
As part of the Income Sharing Agreement, payments start when graduates land a position paying at least $40,000 a year and will be set at 8 percent of their monthly income for 48 months or until the tuition is paid in full. For example, a grad making $60,000 a year will pay about $400 a month and pay off tuition in a little over three years. Unlike student loans, graduates aren’t charged interest. Payments are deferred in the case of job loss, drop in income or a return to school.
The benefits of the program over taking out private student loans — federal loans aren’t applicable to coding bootcamps — is key to Snepar, who hopes tuition programs like it will influence more traditional academic institutions.
“Schools have to be accountable to our students, we have to be able to deliver value and put out money where our mouth is,” he said. While he couldn’t name names, Snepar said NYCDA has had conversations with schools in New York and Philadelphia about the concept of bootcamps partnering with university’s continuing education programs.
According to a 2016 study by Course Report, which tracks the coding bootcamp market, 1,143 graduates surveyed reported an average $26,021 increase in salary after going through the course and 75.2 percent reported finding a job in the first four months after graduating, a number that rose to 89 percent when looking at a longer time span in excess of four months. Out of those with a full-time job, 73 percent are using the skills they learned at their bootcamp.
None of the participants who took the survey were from Philadelphia, however, which is relatively new to being home to coding bootcamps. NYCDA launched locally in 2015, Boston-based Launch Academy followed in 2016.
While they’re the only two options with a presence in Philadelphia, the overall bootcamp market in the United States is growing, with a separate Course Report study reporting the 95 bootcamps it surveyed grew from graduating a collective total about 10,300 students in 2015 to 15,000 in 2016 and nearly 23,000 this year. They brought in a total of $266 million in gross revenue. Despite the growth, a handful of notable bootcamps closed or are closing, including Dev Bootcamp, which had been acquired by Kaplan a few years before, announcing it would shut down operations for good this December.
Greater consolidation in the industry is expected. NYCDA was bought by Strayer Education, which also owns Strayer University that caters toward working adults, in January 2016.
A report from Insider Higher education on the Dev Bootcamp closing said that the consolidation will likely continue as the crowded national market will right-size itself to demand.
"We've been forecasting a consolidation wave within the boot-camp industry; there are simply too many schools for everyone to be profitable," Rick O'Donnell, founder and CEO of Skills Fund, a lender that works with bootcamps told the outlet in a statement. "Consolidation in growing industries happens all the time -- from retail banks to airlines to gas stations to auto manufacturing to ERP software firms -- industries with increasing customers and revenue often go through a consolidation phase on the path to profitability and sustainability."
Snepar said it’s the backing from parent company Strayer that made it possible for them to delay bringing in revenue until students start earning.
“There is some element of a working capital risk, however I believe it more demonstrates our confidence and ability to educate students and their path to employment,” he said.