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Financing Options Are Finally Catching Up With Coding Bootcamps' Growth

Loan offerings and policy changes are in the works, thanks to advocacy by organizations like General Assembly and Dev BootCamp.

Financing Options Are Finally Catching Up With Coding Bootcamps' Growth
[Photo: Flickr user Scott Akerman]

When Jon Stowe, president of Dev BootCamp, arrived at the White House for a roundtable discussion with members of Cabinet last fall, he wasn’t sure what to expect. He looked out at the faces around the room: Vice President Joe Biden, Chief Technology Officer Megan Smith, Secretary of Labor Thomas Perez, mayors and corporate CIOs from around the country. It was a formidable audience.

Stowe began describing Dev BootCamp’s approach to teaching students how to code, and the high-paying jobs its graduates were landing. "The main reason that an accepted student chooses not to attend is financing," he says he told the group during the closed-door conversation.

Biden indicated that the government was looking into ways of improving bootcamp students’ access to financial aid, saying it was not a question of it, but when, according to Stowe.

That endorsement of intensive learn-to-code programs like Dev BootCamp, which is owned by Kaplan, is no happy accident. Dev BootCamp and its leading competitors, including General Assembly and the Flatiron School, have been pushing regulators and the private sector to develop policies and products that better suit their students. The fact that these for-profit enterprises have been successful so far in making their voices heard, in such a short period of time, is all the more remarkable given the concurrent collapse of more established for-profit education providers like Corinthian College, which filed for bankruptcy earlier this year amid calls for reform.

Now, after months of behind-the-scenes discussions, the private and public financing options available to bootcamp students are starting to multiply. Online lending startup Affirm announced on Monday that it would be introducing a new version of its existing loan product, customized for bootcamp students. And last week, the Chronicle of Higher Education reported that the Education Department is exploring a way of extending Pell Grants to bootcamp and MOOC students, by supporting programs operated in partnership with accredited institutions.

A department spokesperson, Alberto Betancourt, declined to comment on the Chronicle report. "The Department is considering ways to encourage partnerships between non-traditional providers and institutions of higher education," he said in a statement. "The Department has yet to determine the best way to facilitate these collaborations, but is considering many options."

There is cause for prudence. Bootcamps are expected to more than double the number of students they graduate this year, rising from 6,740 in 2014 to over 16,000 in 2015, according to Course Report. Entrepreneurs, seeing an opportunity, have flooded the market with new schools—there are 67 and counting, charging students an average of $11,000 for roughly three months of instruction. Quality remains difficult to gauge: A new trade association, which launched in March, remains something of a placeholder, as the founding schools debate standards and membership requirements.

Meanwhile, Affirm is moving fast to piggyback on the success of Earnest, one of the first financial services companies to target bootcamp students and the current market leader. Earnest's bootcamp loan volume for the first half of this year was double its volume for the second half of last year, the company says. (Earnest administers its bootcamp loans in a manner similar to its personal loans, as Affirm plans to do. These are private loans that happen to be for students, not to be confused with federal student loans.)

For Affirm, which raised $275 million last month, the bootcamp loans represent a first foray into a more specific need category. When students are accepted to one of Affirm’s partner schools, like Dev BootCamp or GA, their congratulatory email will include a link to a school-specific landing page with information about financing through Affirm.

"Credit should come in and take care of you, and it should be smart enough to know what you can handle," says Brad Selby, vice president of merchant services at Affirm. "These are people that are making themselves productive members of our society. We want to give these folks an opportunity to learn their stuff and go into the world."

Affirm’s lending rates will range from 6% to 20%, depending on students’ credit histories. Earnest, in contrast, tops out its rates in the single digits, thanks to stricter applicant criteria. If the government introduces federal loans for the bootcamp model, financing will in theory be available to all applicants, and not just those deemed credit-worthy by the private sector.

"My attitude toward it all is very cautious optimism," says General Assembly cofounder and CEO Jake Schwartz. In 2013, he hired an Obama administration veteran to manage public policy and external affairs. "It’s really cool that people in the government understand the need for alternative frameworks here. At the same time, I’m cautious about a boatload of government money entering this nascent space—the influx of Title IV and government money is what caused the bad actors in the previous model."

History could easily repeat itself. Earlier this month, Apollo Education Group, parent company of the University of Phoenix—which is known as one of the largest of those bad actors—purchased a controlling interest in bootcamp startup Iron Yard.

Schwartz says he would rather see employers foot the bootcamp tuition bill, not taxpayers. "The more we can involve an employer, and not just a third-party player system, the better off we’ll be," he says, noting that corporations already spend billions on hiring and recruitment.

As for the private loans now available via Affirm and Earnest, Schwartz says GA has played an active role in shaping the market. "We have a real power and an obligation to steer and dictate those terms," he says. "We don’t want to force people into five year [repayment schedules]; the ROI should be much shorter than that. We want really clear customer service around approvals, so that students can easily make decisions." About 15% of GA's full-time students rely on private loans.

The question for regulators is whether a system reliant on employers and private lenders serves financially pinched students as well as it serves those looking to add the final polish of a coding certificate to a four-year degree from an elite institution. Increasingly, prospective students view bootcamps as exactly the kind of golden ticket to the middle class that has become elusive in recent years. The Flatiron School, a selective bootcamp, hired external auditors to evaluate its outcomes and found that students on average see 48% salary increases after completing the program.

"You have a product that allows people to invest in education and see a very high return on that investment," says Flatiron president Adam Enbar. "When something like that happens, presumably other people want to make that investment."

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