For someone born in working-class Compton, Calif., to a single mom, a full-time job as a chef paying $55,000 a year might seem like a significant achievement.
But Spencer Taylor had even bigger things in mind.
After turning his Navy service into a cost-free culinary education, Taylor (pictured above) found another financing trick to transition careers and pursue his real passion.
Thanks to an income-share agreement (ISA), he was able to complete a two-year program at Holberton School, promising a career in software engineering. Like other tuition-deferring coding schools, Holberton covers students’ present-day costs in exchange for a percentage of their future income. Some proponents describe these ISAs as “the new student loan.”
“I learned from an early age that life wasn’t fair,” Taylor, now a technologist earning six figures in San Francisco, told Student Loan Hero. “If you want something, you have to fight for it, and nothing in life is free. There is always a cost.”
Time to transition
Taylor disassembled his first computer as a first-grader. Inquisitive and sharp, he picked things up quickly.
Unsure of how to apply his natural talent after high school, however, Taylor joined the military. His GI Bill benefits would cover the next step of his education, and culinary school seemed like his best bet.
Working in food service, however, eventually began to drag on him.
“I was tired of the long hours,” said Taylor, who often punched in for 16-hour days, including weekends. “My life revolved around the kitchen. I loved what I did, but it wasn’t really sustainable.”
In typical millennial fashion, an advertisement in Taylor’s Facebook feed alerted him to a coding school. A roommate who programmed video games and built websites was also a source of advice.
“Just like no day in a kitchen is the same, no day writing code is the same,” he said. “I decided that games weren’t for me, but web development was.”
Just like that, Taylor started saving up for a move to Holberton’s San Francisco campus.
Paving the way with an ISA
After exhausting his military benefits, Taylor needed a new way to pay for his next diploma.
“I didn’t have $15,000 to drop on a [coding] bootcamp,” Taylor said. “The ISA was appealing because I could focus on learning and pay the school back once I got a job.”
If you’re unfamiliar with ISA contract language, here’s how it worked for Taylor: He agreed that…
- … after finding his first job paying more than $40,000 (the income threshold) …
- … he would return 17% of his pre-tax salary (the income share) …
- … for 42 months (the payment term) …
- … or up to $85,000 (the payment cap).
ISAs, which are also sometimes available for bachelor’s degrees on a limited basis, come in all shapes and sizes. Terms offered by one school could differ drastically from another.
Holberton, for example, charges $85,000 for tuition, regardless of whether you sign an ISA or pay up front. But other schools might have a payment cap of double whatever you originally received for your education, making them a risky proposition for students who end up in high-paying careers and must then fork over the entire amount.
Aware that his income-share agreement repayment would begin immediately, Taylor jumped into action. After aggressively applying for jobs while still enrolled at Holberton, he had a $90,000 salary waiting for him upon graduation.
But even with this success, Taylor sees both upsides and downsides to his decision to use an ISA.
Tackling ISA repayment
Half a year into his repayment, Taylor’s still thrilled with his new career. It’s allowed him to solve problems that interest him. It’s also sent him on business trips to New York, Toronto and even Australia.
“I am very happy with my transition,” Taylor said. “I basically doubled my salary as a chef in under a year — well, once I get done paying the ISA.”
But while not harboring regret, he did wonder if he could have paid for his education more effectively.
“I wish I really had sat down and fully understood how much I would eventually be paying,” said Taylor, who logs into Holberton’s student payment portal every month to hand over a percentage of his paycheck. “Again, I’m very satisfied with my education, but maybe I would have really explored more options had I taken that extra time.”
For example, Taylor could have checked his eligibility for the Department of Education’s EQUIP program, or simply considered coding schools with a lower cost of attendance.
He might have also gauged student loans for bootcamps. ISAs and student loans vary in significant ways: ISAs don’t include a credit check or an interest rate, for example, but a loan could still be cheaper to repay under some circumstances.
Should you consider an income-share agreement for your education?
Taylor acknowledged that what worked for him might not work for others.
“Make sure [the education] is something you are very interested in and you understand the terms of what you’re agreeing to,” he said, “because this decision is not without risks.”
For instance, Taylor saw some of his Holberton classmates struggle on and off campus. They might have discovered that coding (or Holberton’s project- and peer-based teaching style) wasn’t for them. They might have also found it challenging to live as a student in one of the most expensive cities in the U.S.
Some of Taylor’s peers left school still on the hook for their ISA agreements, which don’t include federal loan-like repayment protections and aren’t well-regulated by the government.
“[It] sucks to take the risk to go to this school, find out it isn’t for you, and still owe 17% of whatever other job you end up taking,” he said.
For its part, Holberton, like other schools, allows students to cancel their ISA within 30 days of enrolling or before the charges begin, or, after completion, to defer — or postpone — their repayment if they struggle to find work.
Still, if you’re inspired by Taylor’s success story, make sure to also consider his classmates’ cautionary tale before you follow in his footsteps.