As many things around us get disrupted, from ride sharing to food delivery, education is no exception. ISAs or Income Sharing Agreements are a novel way of financing tuition which is proving to be popular with both students and educational providers. What are Income Sharing Agreements and who really benefits from them? We take a closer look.
What is an ISA?
Course Report explains that an Income Sharing Agreement allows students to pay a percentage of their salary to the learning institution for a period of time. This means that students essentially defer the payment of their course fees until they have secured a job. In practice, the percentage of the salary can range from 8% to 25%, and you’re likely to be sharing your income from 1 to 4 years.
It’s clear that ISAs offer some obvious benefits, including:
- Aligning the institution’s goals with those of the student. If the student doesn’t succeed in finding a job, the institution won’t receive their tuition. The schools now have “skin in the game” so to speak, and this incentivises them to ensure that their students succeed.
However, it’s not all so clear cut as it may at first appear: there are disadvantages to Income Sharing Agreements, state the critics. Sarah Goldrick-Rab, a professor of higher education policy and sociology at Temple University as well as the author of Paying the Price: College Costs, Financial Aid, and the Betrayal of the American Dream, a book built “on six years of research tracking thousands of low and middle-income students”, has a number of criticisms. She states that certain kinds of people, particularly those who know “their economic lives are fragile” will be wary of such a scheme, which entails their giving away some of their future income – an ISA is just too “uncertain”. These are people who not only have to look after themselves in their future but other dependents as well, including their parents or other extended family members.
Also, Goldrick-Rab claims an ISA is a “fully-privatized” solution. Government and taxpayers are not getting involved in realising the common good of educating young people in high-demand skills. Imagine, she says, “if we had decided to finance elementary school for people through an ISA”. Instead, broad-based government support was involved, because we wanted people to have an elementary-school education which was then expanded to secondary education. “I think it’s very reasonable in the 21st century to at least argue that it should include grades 13 and 14,” she says.
There’s an additional downside. It could be argued that inequality will be further baked into the system, because companies will choose those students who are most likely to land high-prestige secure jobs. How willing will companies be to take a chance on students who don’t yet have a track record, if their payment model is built on students landing a job?
Worth checking out
If you decide an Income Sharing Agreement is for you, make sure you check out the following, from Course Report, before signing on the dotted line:
- Must you accept your first job offer?
- Before you need to start paying, is there a minimum salary requirement? You don’t want to end up not having enough to get through the month. Also, you could end up paying a higher percentage if you are earning a lower salary.
- Is there a cap on total repayments? You may end up paying much more than you would have if you’d paid upfront (think about buying something, a laptop for example, on terms – it could make financial sense to save up the money first rather than paying it off; the same principle would apply here).
- What happens if you don’t find a job within a certain stipulated time – will you still have to pay the tuition costs back?
- How long will it take you to pay back the tuition costs, and how does this fit in with your own life goals – e.g. purchasing a property or a car?
In conclusion, Income Sharing Agreements are a novel and exciting way of paying your tuition costs for a coding bootcamp. However, according to the HyperionDev Graduate Outcomes Report you can expect, on average, an increase of R12 000 per month, equating to an extra R144 000 per annum after completing your coding bootcamp. You need to think carefully if you want to commit a portion of this increased salary to paying off your tuition costs. You could well end up paying more. In addition, HyperionDev offers various payment plans, including upfront and installment schedules. This makes it easier to plan your budget when studying and when you land your first job – 72% of HyperionDev graduates found a new tech job within three months after graduating – you get to keep your full (and much improved) salary each month.
If you’re keen to change careers or upskill, consider enrolling on a HyperionDev online bootcamp in Full Stack Web Development, Data Science or Software Engineering. You can also trial one of these courses for free. If online learning is not your thing, you could enrol for an immersive, face-to-face Web Developer or Software Engineering course in Cape Town or Johannesburg.