What Juno has learned offering Income Share Agreements to Bootcamp students

Almost a decade ago, Coding Bootcamps began to emerge across Canada to help fill gaps in the workforce. The model works well for the tech ecosystem because these short programs are laser-focused on specific skills required for employment. Bootcamps work for students, too, given the short time commitment and the fact that most Bootcamps publish reports about their outcomes, giving students more confidence in attending a Bootcamp over spending more time at a traditional institution. Schools that prioritize transparency even use the system provided by the Council on Integrity in Results Reporting to share outcomes using a common framework.

Since 2012, Juno College of Technology has helped over 1,100 Bootcamp graduates make a career change into tech. And since launching Income Share Agreements in 2019, we’ve foregone over $1 million in tuition to help even more students attend Juno, students who would have otherwise had to pay upfront – or, more likely, may not have been able to attend Juno at all.

Here’s what we’ve learned in that time about Bootcamps and ISAs.

Bootcamps and ISAs

Known as “Bootcamps” in the industry since 2011, these are short-term, intensive, and often full-time programs that teach students skills to help them land a job, usually focused on the tech industry.

At Juno, our Web Development and Data Analytics Bootcamps are nine-week programs that provide a unique blend of hands-on project-based learning from caring instructors in a classroom (physical or virtual). Throughout either program, students also receive personal career coaching until they land their first job in tech.

Students often choose Bootcamps because they are shorter and cheaper overall than the more traditional route, such as getting a post-grad or a Master’s degree. But no matter the path, with the pandemic resulting in the number of workers in need of retraining growing to potentially the millions across North America, it’s worth asking the question: what is the optimal way for people to pay for their education?

Today, we have two main options: we can ask people to pay out of pocket, or we can tax people and use the taxes to cover the cost (i.e. student grants). Since Bootcamps are focused on helping students launch new careers in the shortest amount of time, we have more flexibility in how we ask students to pay for our programs, which has led to an exciting innovation: Income Share Agreements.

Juno has given out more than 120 Income Share Agreements, which totals over $1 million in tuition students did not have to pay upfront.

Referred to in the industry as Income Share Agreements (ISAs), the concept allows eligible students to only pay back their tuition once they find a job. Once they start a job making a minimum amount per month, they pay back a percentage of their income for a certain number of months or years, up to a maximum amount, referred to as the “cap.”

At Lambda School, one of the US-based schools responsible for popularizing the ISA over the past few years, students opting for an ISA pay nothing upfront. Then, once they are making $50,000 USD a year, they pay 17 percent of their income for 24 months, up to a cap of $30,000 USD.

At Juno, our Web Development and Data Analytics Bootcamp programs are $12,995 CAD upfront, for those who choose that method. Our cap is set at 1.5x our upfront tuition, so the most our students will ever pay is $19,492.50 CAD. Our graduates only start paying once they are making $50,000 a year; their monthly payment is 17 percent for 24 months, and after 60 months, no more payments are due, even if the cap hasn’t been reached.

Juno also pioneered the Pay-What-You-Can Income Share Agreement to give students a third payment option that allows them to pay a portion of their tuition upfront (more than $1 but less than the full amount), resulting in a lower payment overall than if they went with a full ISA.

Benefits of ISAs

Since launching ISAs in mid-2019, Juno has given out more than 120 Income Share Agreements, which totals over $1 million in tuition students did not have to pay upfront. ISAs have several features that make them better than alternatives like loans.

Unlike loans, ISAs offer students flexibility. Students only pay once they are making $50,000 a year or more, and in any month that they make less than the monthly equivalent of $50,000, they don’t pay. This means that students get a break from payments if they are laid off or need to take time off work to care for a family member or a new child. We’ve had students experience lay-offs and pay cuts, especially with the pandemic, and I love that we’re able to support these students by saying, “don’t worry, no payments are due this month.”

Another benefit of ISAs is that they can make education more accessible for those who either don’t have the money to pay upfront or the ability to get a loan.

Some US states have begun to regulate ISAs, and in Canada, Juno has received permission to offer ISAs from Ontario’s Ministry of Colleges and Universities.

Asking people to pay out of pocket has obvious limitations, because lower income people, people with poor credit, and those without family support are more likely to be left out. Paying out of pocket is the least inclusive option, and this is an area in which ISAs shine. We do not require a credit check in order to obtain an ISA.

ISAs are also a great fit for more risk-averse students, even among those who can afford to pay. The idea of quitting your job and going back to school is a scary proposition for many, and we know that men are more inclined to take risks than women. An ISA doesn’t remove opportunity cost, of course, but it helps.

The third benefit of ISAs is that they align incentives. At Juno, as mentioned, we’ve forgone over $1 million in the past two years, and we’re increasing that now to nearly $1 million a year. If we don’t help our graduates land jobs making $50,000 a year or more quickly, we won’t be repaid.

We target 70 percent placement by three months post-graduation, and 90 percent by six months, and unlike other schools, we use every student who graduates as our denominator. We’ve also made the explicit decision that we treat all of our students the same, whether they pay upfront or with an ISA. Unlike colleges and universities, we’ll be put out of business if we can’t place our grads in high-paying roles they are happy with, and ISAs give us the chance to put our money where our mouth is.

Drawbacks with ISAs

Sometimes ISA programs aren’t managed properly and the incentive alignment can be put at risk. When we first started exploring how to introduce ISAs as a payment option, I was stumped. How could we afford not to collect tuition upfront, and instead collect it over a two- to five-year period? After all, we have to pay our rent and instructors and staff today. In the end, we took out a loan from BDC to support the initial crop of ISAs and decided to use our profits going forward.

For us, this means limiting the number of ISAs we can offer, which also limits accessibility and impact. For larger schools that want to offer ISAs to a higher percentage of students, the task of figuring out how to fund upfront operations can be intimidating. One solution that we haven’t used at Juno but that we’ve seen in the industry is “selling” ISA contracts to investors. In this case, an investor, either directly or through a platform like Edly, would purchase one or more ISA contracts from the school at a discounted price. The school accepts this lower amount because they want the cash now. Then, students make their payments to the investor, and the investor hopes the students do well, resulting in returns for the investor.

Over the long term, incentives are aligned: if investors don’t receive positive returns, they won’t fund ISAs anymore, and the school will go out of business. The issue is in the short term. It might take years for an investor to realize that the school is doing a poor job. During that time, countless students could be negatively impacted by an experience at an underperforming school.

Heather Payne, founder & CEO of Juno College of Technology.

Another issue with ISAs is that they only work for programs with strong job outcomes, and tend to work best with shorter programs, which is likely why we are seeing them used more successfully with Bootcamp-style programs than four-year degrees. When a program lacks strong job outcomes or is very long, the time between graduation and when a student begins making ISA payments is also long. This increases the amount of cash needed to run the ISA program, as you have more students and graduates in “not paying” mode for longer.

For a university, to shift over to ISAs for all students would require an enormous amount of cash upfront. After about four years, payments back to the university would start to balance the outlays, but a school with 30,000 students and a cost per student of $5,000 a year would require an initial investment of $600 million or more to switch over to ISAs.

The other issue with ISAs is that they aren’t regulated in many states and provinces, which can mean a risk for students. For example, what if a bad actor creates an ISA that requires 50 percent of the student’s salary to be paid each month? ISA contracts can be confusing, so it’s possible that bad actors may take advantage of people.

This, of course, is the benefit of regulation: to protect consumers. Some US states have begun to regulate ISAs, and in Canada, where Juno remains one of the only schools offering ISAs, we’ve received permission to offer ISAs from Ontario’s Ministry of Colleges and Universities, and our contracts have been reviewed and approved.

Early results

Happily, we’re seeing near-perfect repayment rates and a positive return on investment, which will allow us to increase the number of ISAs we can offer over time. It’s neat that our earliest ISAs students are actually the reason we’re able to keep offering ISAs. I will always be grateful to our early adopters for making ISAs an option for our community going forward.

What I’m most looking forward to is the moment when we have reliable data and can say, “yes, when we give out ISAs, there is a positive ROI,” which would help us make a case for offering unlimited ISAs. This would remove the barrier that tuition plays in joining our programs, and may create an opportunity for us to then turn to other barriers, such as living expenses and device accessibility. Expanding our ISA program to cover a living stipend and offering laptops for free or for a rental fee is something we’d like to explore.

As an educational entity, Juno is in a unique position to be able to influence the makeup of the technology industry in Canada and beyond. Ultimately, we know that we can’t do it alone. We know that building a thriving tech ecosystem in Canada – one that includes highly skilled talent from diverse backgrounds – requires broad changes in culture and a commitment from those running the most influential companies. But if educating the next generation of tech talent is the first half of the equation, we happily take on that responsibility.

Images courtesy Juno

Heather Payne

Heather Payne

Heather Payne is a Toronto-based entrepreneur and angel investor with a passion for education and technology. In 2012, she founded Juno, serving over 1000 students a year from a 12,000 square foot space at Queen & Spadina. She is also the founder of Ladies Learning Code, now known as Canada Learning Code, a national non-profit serving Canadians in dozens of cities across the country. In 2013, she was named one of Canada’s Top 100 Most Powerful Women for her work exposing women and girls to programming and technology.