CODE RED

Alternative lenders swoop into booming coding school market

Obsession
Future of Finance
Obsession
Future of Finance

A rash of companies are looking to make money off the next generation of education financing: coding schools.

The forces for a booming market are all there. College is getting pricier, salaries for computer programmers are going up, and people are flocking to non-collegiate classes at for-profit education startups like General Assembly and the Iron Yard to learn coding and other technology skills. The coding bootcamp market is poised to more than double in 2015 to 16,056 graduates, up from 6,740 in 2014, according to industry researcher Course Report.

The question is—since coding academies aren’t technically US educational institutions and are ineligible for federal funding, how are all these students going to be able to afford the $6,000 to $20,000 (per three-month course) for the classes?

Enter companies like Affirm.

Max Levchin, the former PayPal co-founder who now runs the alternative online lender, said today that his company would start offering loans to people for coding classes. Loan terms last 12, 15 or 18 months and annual interest rates range from 6% to 20%. For most coding schools, payments aren’t due until after the first six months of study, but interest starts accruing on loans the moment the money is disbursed, the company said.

Other upstarts offering loans to coding bootcamp enrollees include Climb Credit (backed by the cofounder of now-defunct student lender MyRichUncle) and Earnest, an online lender founded in 2013 that’s backed by Silicon Valley venture capital firms like Maveron and Andreeseen Horowitz.

Even the US Department of Education is experimenting with allowing students to use federally-funded Pell Grants to pay for the alternative programs.

Helping people get access to more education is a great thing. But the chances of getting a job post-coding camp are okay at best, and, as The Wall Street Journal points out, not that much higher than those of law school grads becoming lawyers. Add even more students in debt to the worsening education loan crisis, and the results might not compute.

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