KTOO: New Student Loans For A New For-Profit Education Sector

Career College Central Summary:

  • Coder boot camps. Accelerated learning programs. New economy skills training.
  • Whatever you call them, these new players in higher education are multiplying. The intensive programs say they can teach job-ready skills in technology, design and related fields. In record time.
  • In three or four months of really long days, students with little prior experience are getting up to speed in the latest programming languages with Hack Reactor, General Assembly or Dev Bootcamp. Typically, the cost is $10,000 to $20,000.
  • The sector predicts 16,000 graduates this year, compared with 48,700 bachelor’s degree recipients in computer science. Many go on to six-figure jobs in the software industry.
  • One fan of these programs is President Obama. In March, the White House announced the TechHire initiative to help communities recognize, and hire, boot camp graduates in order to close the famous “skills gap.”
  • “There’s a lot more we can do together to make sure that more Americans benefit from a 21st century economy,” Obama said to the nation’s mayors. “Folks can get the skills they need in newer, streamlined, faster training programs.”
  • These programs are also notable for what they’re not. They’re not publicly funded. They’re not traditionally accredited. That means they can’t offer federally subsidized student loans or Pell Grants.
  • So what if you want to quit your dead-end job and move to the East Bay or Silicon Alley to crush code? You could tap your savings or put it on credit cards. That favors those with family or personal resources.
  • Perhaps as a result, enrollment in the boot camps is predominantly male, white, and people with some prior college experience.
  • As of the past year or so, another option has emerged. You can now finance your boot camp education through a startup student lender such as Skills Fund, Pave or Earnest.
  • “Most of our programs have guaranteed financing,” says Shawn Drost, a co-founder of Hack Reactor. “We ship the private lenders our sheets of graduates and defaulters and they end up charging like 10 percent interest, and students pay it back within in a year.” He says about half his students take advantage of these private loans. General Assembly says it’s 15 to 20 percent.
  • A new company, Affirm, has just this week entered the boot camp lending business. It says it will lend to riskier boot camp borrowers at annual interest rates up to 20 percent.
  • “It’s progressive underwriting,” says VP Brad Selby, who previously worked at Paypal (Affirm CEO Max Levchin, a Paypal founder, is well known in the tech scene). “We want to approve more people.”

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