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Keeping Income Sharing Agreements Fair and Accountable

If you haven’t seen the letter that we cosigned, we recommend you check it out: We have the entire letter at the end of this blog post. If you have, we’d like to share the “Why” behind our support of this statement.

We believe Income Sharing Agreements (ISA) are part of the future of student funding for their education. When properly set up, ISAs have incredible benefits:

  • ISAs tie student success to school success. We invest in our students by providing them an education and they only contribute back financially if they are professionally successful.
  • ISAs help expand education to more students who may not otherwise be able to afford a post-secondary education. Since ISAs are not loans, people who come from disadvantaged backgrounds are able to achieve success relative to their capability or drive, and not to their ability to secure a loan.
  • ISAs eliminate the lifetime of student debt. Because the repayment period is limited in time, after a certain number of payments have been made, the repayment ends regardless of the remaining balance.
  • ISAs help us set a success floor. Until students hit a minimum income threshold, no payments are due.

But, as with anything that works this well, bad actors may appear. We’re proud of what ISAs can do, but in the hands of predatory lenders, we may just end up with Private Student Loan Debt 2.0: the exact opposite of our vision.

As a part of creating this letter sent to leaders of both parties and both branches of Congress to ask something simple, and honestly respectable, of any new industry: We want regulation that protects students. With ISAs, we’ve been able to serve an incredibly diverse population, with 60% of our student body being people of color. Also, with 37% of our student body as part of the first generation in their family to attend a post-secondary school, ISAs promote upward economic mobility. ISAs, combined with our blind admission process and unique curriculum, helps us break open the stereotypical racial and economic demographics of the tech workforce:  As of today, 100% of our graduates find employment opportunities in three months at an average starting salary of $108,000.

We hope this letter in Washington helps spark bipartisan cooperation and support for regulation that protects our students of today and tomorrow.

The original letter, as sent to both branches of Congress, follows:


Holberton School is pioneering the democratization of debt-free education

Yannis Peyret, CFO Holberton School

Holberton School is a software engineering school started in San Francisco that adopts a project-based education model focusing on peer learning. With a physical campus, but no teachers, students follow a rigorously structured program for two years. The program trains them to adapt to new technologies by “learning how to learn” and prepares them for the workforce by focusing on collaboration and teamwork. Holberton’s mission is not only to train the best software engineers of their generation, but also to make its program widely accessible.

As CFO, Holberton’s concept of “no upfront tuition” is particularly important to me. In lieu of paying tuition, graduates of Holberton are only required to make payments if, and when, they obtain a high-paying job. Then, and only then, do they contribute a percentage of their salaries back to the school for a fixed term of 42 months. This kind of agreement—called an Income Share Agreement, or “ISA” for short—is growing in popularity within the education space. Holberton didn’t invent the ISA, but it is one of the pioneers in democratizing this kind of education payment plan. What is most exciting about ISAs is that they align the school’s success with its students: if our students don’t get anything from the education we provide, then neither do we. To be clear, the Holberton ISA is not debt, has no principal balance and no interest. Students only make payments if their annual salary is at least $40,000, and they do not accrue interest nor have any obligation of payment if they’re unemployed or earning less than the threshold. To date, recent graduates of Holberton have received software engineer internships and full time jobs with starting salaries averaging $92,000 per year, with full-time employees earning on average $105,000 per year.

Today, we break another barrier.

Edly, an online marketplace connecting income share agreement investors with top schools, is announcing today that Holberton will be the first to list and trade on its exchange. With a first inaugural trade of $2 million, this new marketplace will open doors to prospective investors that want to do good while doing well. Until now, we have been tied to our venture capital fundraising efforts to fully underwrite the tuition costs, limiting how fast we can expand and how many students we can welcome through our doors. With the new platform, we can make use of this new asset class and leverage it to receive an advance on student contributions. This funding will help us cover our costs, grow our campus, and expand our impact while keeping our mission front and center. Holberton’s success will continue to be tied to its students’. With Edly’s marketplace, ISAs are becoming a more sustainable and viable tool ready for mass adoption.

We are now accepting applications for the cohorts beginning June 10, 2019. Students and parents who want to learn more about the program are encouraged to visit http://www.holbertonschool.com/education for additional information, eligibility requirements and a tool comparing deferred tuition agreements with other financial aid options that may be available to students.