Tuition fee model for coding schools extends to 4-year colleges
Despite these concerns, graduates who have started repaying their ISAs say they weigh less than loans. Charlotte Herbert funded her senior year at Purdue with a revenue sharing deal for around $ 27,000; every month, in addition to her federal student loan payments, she pays her investors 10% of her pre-tax salary of $ 38,000, and will continue to do so for the next seven years. “Knowing that this will never be more than 10% of my income was pretty reassuring,” said Herbert, 24, a technical guide and manual writer for an engineering company. “My big concern with my loans is that because of the interest, it will continue. I am constantly looking for how I can pull a little more to get past the interest.
Coding for jobs
An hour’s drive from Purdue, Kenzie Academy, a for-profit tech school located in a former opera house in downtown Indianapolis, aims to train graduates for high-paying jobs. On a recent morning, nine students were seated at white tables as an instructor wearing a blue Kenzie t-shirt answered questions about how to fit their resumes for jobs in software engineering and user experience design .
“All of our survival depends on the success of our students,” said Chok Ooi (pronounced “Oy”), the 39-year-old founder of Kenzie, sitting in a glass-walled room near the entrance to the school which overlooks exposed brick walls, Wayfair furniture and an open floor plan. “So we really really invest in our students. “
Ooi, who grew up in Malaysia and moved to the United States for his university education, opened Kenzie in September 2017 with the aim of closing the gap between the skills of workers and the needs of the growing tech industry at Indianapolis and beyond. He was looking to attract students who had been displaced by automation; wanted a faster and cheaper way to get into the tech workforce than college; or were looking for a new start. Like most coding schools, Kenzie does not qualify for federal funding, so students had few options beyond expensive private loans (assuming they had the credit scores to get them. ). Ooi researched the ISA model and liked what he saw. Students can pay a tuition fee of $ 24,000 if they have the money, but most of Kenzie’s 500 students pay for the school with ISAs.
Kenzie’s ISAs work like this: Students pay $ 100 up front and no tuition until they get a job with a salary of at least $ 40,000. Once they do, they pay 13% of their monthly income for four years, up to a maximum of $ 42,000. If they lose their jobs or their income falls below $ 40,000, the payment period can be up to eight years.
To gain admission, applicants are tested on their problem-solving skills; about 25 percent of those surveyed are accepted, depending on the school. Admitted students must overcome additional hurdles to qualify for an ISA, such as demonstrating that their existing debts will not prevent them from managing their revenue sharing obligations.
Some Kenzie students have a bachelor’s degree which has not helped them in the workforce. Nick Howell is one of them. Howell, 35, graduated from Purdue with an associate’s degree in professional flight and a bachelor’s degree in business. But he could only find low-paying warehouse and office jobs, he said, and grabbed the collection of the $ 50,000 and more he owed in student loans. He’s now on an income-based federal repayment plan that requires him to pay 3% of his income to the government, down from 7% after Howell recently renegotiated him, but interest continues to accrue.
In 2018, Howell enrolled at Kenzie in hopes of gaining marketable skills. Less than a year after starting, he received a job offer from a large web development company. Today, he earns $ 55,000 a year building websites for car manufacturers. Between his financial commitments for his Kenzie and Purdue degrees, he pays 16% of his income, but he says it’s manageable as his wife earns a living wage as a lab technician.
“We’re doing a lot better than before,” said Howell, who grew up in Crawfordsville, near Indianapolis. “Traditional loans are a scam,” he added. “I’m going to push 110% income sharing deals on people rather than taking traditional loans just for the fact that, yes the percentage is higher, but it’s based on (a) a job that you have.” , and you pay nothing if you don’t have a job, and (b) there is no interest.