Kelly Moreira’s journey to a career started like a lot of others. She went to a university, took out a student loan, and earned a bachelor’s degree in human resources. In the process, Kelly gave up a living-wage job to focus on her studies and graduate in four years. Yet after receiving her degree, Kelly had $30,000 in student loans and no job to show for it.
“There was just no logic to it,” she said. “It never made sense to me how you go to a university to get a degree, pay so much for it, and not have anything besides a piece of paper by the end of it.” With no local job prospects and a complicated home life, Kelly moved abroad in the hopes of getting a job.
But that didn’t pan out as she’d hoped. Kelly returned to the States still in need of a job. “When I came back, someone I know told me about Lambda School and their business model. So, I looked into it.” Shortly after, she enrolled in Lambda School.
Despite committing to the school, Kelly still had reservations about life after the bootcamp. “I thought, ‘What if nobody wants me?’” she said. “‘What if I don’t get a job again? What if this was a repeat of graduating university?’”
Debt by Degrees
Across industries, employers and hiring managers use bachelor’s degrees to screen out job applicants—but that doesn’t mean a degree is a ticket to success. Today, 53 percent of recent college graduates are underemployed or unemployed.
Several factors contribute to unemployment and underemployment among college graduates, a leading one being the “skills gap.” It’s caused by a disconnect between what’s taught in class and what’s expected in the workplace. Following on its heels are crushing student loans, which have forced some graduates to take jobs they otherwise would not.
Hoping to escape yet another traditional student loan, Kelly enrolled in Lambda School’s Software Engineering Program. Her decision served two purposes. First, Lambda School is a coding bootcamp that promises to equip its students with relevant skills and hands-on experience in software engineering and data science. By enrolling in the school, Kelly hoped to secure the skills she needed to finally land the kind of job that she wanted.
Second, Lambda School offers a type of loan rarely seen in universities: the income share agreement or ISA. “There are different ISAs offered at different bootcamps for different programs,” said Kelly. “But essentially, the ISA is there to hold the school as accountable as the student in helping the latter land a high-paying job—because, in the end, that’s the only way the school gets paid.”
While Kelly’s definition shines a light on the value of income share agreements, the ISA loan deserves a closer look.
Inside the Income Share Agreement
Aside from promising a top-tier curriculum and expert-led instruction, there’s something even more appealing about a school that offers a financial agreement that aligns incentives between the school and the student. Such is the value proposition of coding bootcamps like Thinkful, Flatiron School, and Kelly’s chosen bootcamp, Lambda School. So, how does its income share agreement work?
The short story is this: through the ISA, you gain access to Lambda School’s full training program without getting charged any up-front tuition. Instead, the school bets on your potential to become a fully trained software engineer or data scientist in less than a year. Once you land a job earning above a monthly minimum income threshold, the school takes its cut.
Here’s the Long Story
To attend Lambda School, you can sign a contract that bears the following terms.
1. Once you secure a job that pays a gross monthly income of $4,167 (equivalent to $50,000 per year, though most schools calculate ISA payments using your monthly income) and upwards, your time to start repaying the debt starts. Per the ISA, you’ll need to pay 17 percent of your gross monthly salary to Lambda until you fulfill certain conditions. Let’s consider two different scenarios.
- Case 1. A Lambda School graduate earning $3,333 per month (equivalent to $40,000 a year) is not obligated to pay their ISA debt until they hit the minimum income threshold.
- Case 2. If, for instance, another graduate lands a job that pays $5,000 per month (equivalent to $60,000 per year), then their ISA payments start. If we do the math, that means they’ll have to pay $850 per month.
2. Your ISA payment continues until any of the following conditions happens—whichever comes first.
- Condition 1. You have paid 17 percent of your gross monthly income for two years.
- Condition 2. You have reached the $30,000 payment cap.
- Condition 3. You have not secured a job that pays at least $50,000 in five years and have therefore deferred your monthly payments.
3. You are required to pay 100 percent of your ISA once you complete the first 15 sprints of your chosen Lambda School program, regardless of whether you complete your training. The percentage you owe increases as you progress through the program as shown in the breakdown below.
- Sprint 1 to 4. You are not obligated to pay any tuition or penalty even if you withdraw from the program. This gives you room to test whether the program is right for you without having to shoulder any costs.
- Sprint 5. You are locked in to pay 15 percent of your ISA, provided you land a job that pays at least $50,000.
- Sprint 8. You have vested 25 percent of your ISA.
- Sprint 12. You need to pay 37 percent of your ISA.
- Sprint 16. You are responsible for the full amount of your ISA.
4. Your ISA starts if and when you land a qualifying job or a qualifying position. Note that this applies to Lambda ISAs only. You’ll have to talk to your skills-based training provider to determine whether ISA payments are calculated based on earnings alone or on a “qualifying job” and “qualifying position” as well.
- Qualifying Job. This refers to a job that your chosen program directly trains you for. This includes software engineering, data science, and other tech roles.
- Qualifying Position. This refers to a job that utilizes the skills you gained at Lambda School, regardless of whether it’s directly related to your chosen program or not.
By lifting the pressure of having to pay thousands of dollars up front, Lambda School’s income share agreement opens other options you otherwise would not have been able to consider. For Kelly, there was no shortage of options.
Life After the Bootcamp
“When I graduated from Lambda School, I received three job offers,” said Kelly. “The first two I turned down because the company culture didn’t align with what I was looking for… After the bootcamp, I felt like this was going to be a new life. I wanted to get a job somewhere that’s totally different from my old life. So, I accepted the third offer which is at an amazing fintech startup.”
Kelly’s situation painted a stark contrast from her position prior to Lambda School. Then struggling to find a job, Kelly was finally being sought for the skills she gained during her training. She didn’t achieve it through Lambda School’s instruction or the ISA alone.
“One of the things that some of the students would get during their job-hunting experience was that they didn’t have any professional experience in the industry. And I remember telling myself, ‘No, that’s not going to be me.’”
“So, I gave myself professional experience. I started documenting what I was learning at Lambda through technical writing,” she said. “Was it a living wage? Absolutely not. But it was an awesome way to get a little bit of experience and make some good connections in terms of networking.”
She didn’t stop there. Eager to grow further, Kelly took advantage of Lambda School’s in-house internship experience. “At the time, Lambda had opportunities for students who finished certain parts of the curriculum to go back and repeat as an intern or a teacher’s assistant. I became a voice of the students there.”
Now, Kelly’s doing the same thing—just at a higher level. Working as a developer advocate at the fintech company, Kelly now serves as a voice for other developers in the community. “I do a little bit of support engineering, which means I help other developers from different companies incorporate our API into their product.”
“I do a little bit of software engineering, building sample apps in many different libraries and languages that developers can then use to help them have a quicker integration. And I also do some content engineering, where I do technical writing and video tutorials for other developers for API incorporation.”
So, Is an Income Share Agreement Worth It?
“Absolutely,” said Kelly.
“Paying the ISA doesn’t bother me at all, especially because I do very well with managing my finances,” she said. “With my income, I only spend 50 percent of it while the other half goes to paying my last piece of debt, which is the student loan I had from university. I think I’ll be able to finish that off February of next year.”
Kelly’s enthusiasm is not surprising. Enticed and enabled by the ISA model, she was able to get the education she needed to finally get the success and financial independence that she hoped to achieve with a college degree.
“I just want to live that free life,” said Kelly, “and it’s coming really soon.”
About us: Career Karma is a platform designed to help job seekers find, research, and connect with job training programs to advance their careers. Learn about the CK publication.
