Are coding boot camps worth the money?
Coding ‘boot camps’ have sprouted up across the country. Their aim is to help recent college graduates learn valuable skills for the job force. But the hefty price tag and a lack of accrediation has many asking if these boot camps are worth the trouble.
Coding boot camps and certificate programs are growing, and private lenders are cropping up to help students attend them. One such lender, Skills Fund, says it won’t finance tuition for these classes unless it knows graduates will end up in high-paying tech jobs, making it a de facto rating service for the programs.
“We have skin in the game,” said Rick O’Donnell, founder and chief executive officer of the Austin-based lender, which started taking loan applications in October. “We only work with the best programs because I want students to pay back loans. If I’m wrong about a program, then we lose money.”
Fixing the gap between the skills that students graduate college with and the ones they need for a good job has been O’Donnell’s battle since he was Colorado’s secretary of higher education, from 2004 to 2006. In that role, he privatized the state’s student loan servicing business. “I was constantly getting complaints that there weren’t enough STEM grads,” he said. “There wasn’t a lack of college grads; it was that the graduates didn’t have the critical skills employers needed.”
The rise of boot camps has been one answer to that problem. The pitch: Learn tech-related skills such as mobile development, Web design and coding for a fraction of the time and expense it would take to get a Master’s degree. Boot camps last from 10 to 12 weeks and charge about $11,000. Starting salaries for boot camp graduates, said O’Donnell, can range from $70,000 to $100,000.
There are 67 full-time boot camps in around 51 U.S. and Canadian cities, according to boot camp review site Course Report, which estimates that by the end of this year, the market will have grown 138 percent from last year.
Not all these programs live up to the promise of all-but- guaranteed jobs with great salaries, however. And with no formal accrediting system in place, prospective students have little data with which to compare them. What’s more, lenders can’t determine how much a program will help or hurt student creditworthiness. Some programs don’t even track graduates’ outcomes, said O’Donnell. “If a program doesn’t even have the processes in place to know what their numbers are, it’s an indication that the program isn’t as competitive,” he said.
As the boot camp market has exploded, private lenders such as Pave, Upstart and Earnest have begun to help finance student tuition. Unlike Skills Fund, which lends only to certificate program students. Those companies also offer loans and refinancing to students of traditional degree programs.
Skills Fund, founded in April, is a fresh addition. It aims to set itself apart by being the first lender to vet the boot camps for quality. The programs that meet its standards are listed on its website and on Course Report. Skills Fund will lend only to programs that meet a set of criteria it has established, including a job placement rate of at least 80 percent and a near-perfect student completion rate, said O’Donnell. “Compared to most colleges, those numbers are phenomenally high.”
So far, six boot camps have made the cut, including Dev Bootcamp, Galvanize, Metis, Sabio and Hackbright Academy, a women-only boot camp. Skills Fund has rejected two, which O’Donnell did not name.
Skills Fund spends several months reviewing a program’s finances, state licenses, and marketing materials and soliciting feedback from students and employers before determining whether it will finance the program’s students.
Skills Fund received $11.5 million in seed capital from the private nonprofit loan provider Iowa Student Loan Liquidity last April. “O’Donnell evaluates these boot camps similar to an accreditor,” said Steve McCullough, president and chief executive officer of Iowa Student Loans. “Skills Fund gives us real numbers, real metrics, and that gives us assurance that students are going to be successful.” Of the $11.5 million, $10.5 million was issued as a line of credit to fund loans for students of the boot camps. The remaining $1.5 million serves as an equity investment to support Skills Fund operations.
Skills Fund offers three- and five-year term loans, most with interest rates of 7.5 percent 10.5 percent, respectively. The rates are similar to other boot camp lenders that are taking on unsecured consumer credit, said O’Donnell, but interest rates are lower for some programs. For instance, at Dev Bootcamp, Skill’s Fund’s rates are 5.99 percent for three years and 7.99 percent for five years, said O’Donnell.
Last month, the Department of Education announced a pilot program that will extend federal loans and grants to students in alternative education courses such as boot camps, but only if they have teamed with a college or university. To qualify for the funding, the Education Department is asking the partnerships to work with their own quality assurance entity and to address a series of quality questions that the department has outlined, said a spokesperson.
O’Donnell, who serves on the Education Department committee overseeing all college accrediting agencies, doesn’t see the department’s program as a threat. “It’s geared toward undergrads and students using Pell grants, which isn’t who boot camps typically serve,” he said. The department confirmed that the program is focused on providing access to low-income undergraduates and diverse students in alternative education programs.