Income Share Agreement — A Student and a pocket friendly way to finance education
Lambda School, found in 2017, operates with an ambitious vision to make Higher Education available to one and all. One can graduate with a Computer Science degree, with absolutely no upfront tuition and they are not liable to pay until they land a job.
Austen Allred, the CEO and Ben Nelson, co-founders of the company, believe that kids often drop out after High School due to rising education costs and insurmountable student loan debts. This was THE founding principle for starting Lambda School which involves no upfront tuition. Their key motive is to train future generations by reducing the upfront cost of higher education, and thereby eliminating the risk of no higher education and hopefully lower high school dropout rate.
The school currently offers a 9 to 18 month (Part-time) intensive course in Computer Science. All lectures and classes are delivered online but live and interactive (rather than pre-recorded and self-paced) — for no upfront cost to the students in exchange for an Income Share Agreement (ISA) once they land a job.
Key ISA clause states: If the potential individual lands up with a job that pays USD 50,000 annually or more ONLY then they shell out 17% of their salary for a period of two years up to USD 30,000 in total, whichever is lower. Basically, a person earning USD 50,000 annually will only end up paying USD 17,000 at the end of 24 months. Whereas, a person earning USD 100,000 will end up paying the max limit of USD 30,000. This post payment model is steadily becoming a norm and emerging across various universities. For instance — Purdue University, one of the top Universities in the US, has begun experimenting with a similar program that charges no upfront tuition in exchange for an ISA.
Since its launch in 2016, Lambda School has raised approx. USD 120 million in various rounds from multiple investors including Y Combinator, Tandem Capital and many more. In August 2020, the company raised USD 74 million in equity (valuation amount undisclosed). The founders believe that this was their final fundraising before their planned IPO. Their main aim is to become profitable in the near future.
Going forward, they intend to launch multiple programs that include a course in machine learning, Artificial Intelligence, Mobile development, Bioinformatics, Nursing and Cyber Security. Once these are implemented, Lambda School is on its path to become a full-scale Online University and be the pioneer in paving the way to eliminate student debt for future generations.
Traditional higher education, which way too often leaves students saddled with debt and no degree, could learn a lot from what coding bootcamps are doing. Postsecondary education desperately needs innovation and continuity after high school and fortunately Lambda School is ahead of the curve in trying new ideas. By adapting and promoting an ISA model, Lambda School is making a commitment to postsecondary education less risky one for the students and thereby committing to their future growth.
