As software eats the world, more people are starting to take coding and design bootcamps to add technology skills to their resumes. But paying for these course can cost thousands of dollars and it can be difficult to get a personal loan from a bank for the amount.
Affirm, the lending startup launched by PayPal co-founder Max Levchin, started offering new financing options to students attending education programs for coding, design, and business. The entry to the market is bolstered by Affirm's announcement on Wednesday that it has acquired talent from startup LendLayer.
Expanding into educational loans makes sense for Affirm, which wants to reinvent the way people carry debt. In particular, Affirm is rethinking the way people—particularly millennials—borrow money, allowing them to obtain a micro-loan at a point of sale instead of using a credit card.
The company’s first payments tool, Buy with Affirm, allows online shoppers to pay for purchases in multiple monthly installments. Consumers submit their name, mobile phone number, birthday, and last four digits of his or her social security number. To estimate risk, Affirm takes into account data from atypical sources such as social networks, or even tracks bank account information to determine cash flow.
Affirm is taking a similar approach to offering education loans. Using proprietary underwriting models, Affirm will evaluate alternative data like one’s LinkedIn profile, their code on code repository GitHub, and previous education. Loans range from $10,000 to $20,000, and can be paid back for up to 18 months. Generally, interest rates are between 6% and 20%, but Affirm says it is working to lower those rates. Average undergraduate Stafford Loans carry an interest rate of 4.6%, and average graduate Stafford Loans charge a 6.21% interest fee.
LendLayer was one of the first companies to start giving loans to coding bootcamp students. Its founders all attended coding bootcamps, and were familiar with the cost incurred with these programs. Affirm says that LendLayer will continue to service its past borrowers but will not offer any new loans going forward.
With partnerships with Kaplan, General Assembly, Hack Reactor and others; Affirm is already starting to roll out lending to bootcamp students. With the acquisition of LendLayer, Affirm will add a number of new educational partners, including Hackbright, Coder Camps and the New York Code and Design Academy.
According to a survey from Course Report, in 2015 coding bootcamp graduates are expected to hit 16,000, up from 6,740 in 2014. The average cost of these programs is around $11,000.
“We believe lending to bootcamp students is the single best way to help them invest in themselves, improve their quality of life, and become successful contributors to the new economy,” Levchin said in a release.
It's important to note that anyone graduating these bootcamps will need to have a job in order to pay back their Affirm loans, and the job hunt after graduating from one of these bootcamps is often not as rosy as their marketing makes it seem. While some bootcamps like App Academy, in San Francisco and New York City, don't charge students tuition unless and until they find a job, vouching for the program's ability to launch coding careers, most do not and even shy away from publicly sharing statistics on graduates' job placement rates.
Brad Selby, VP of merchant services at Affirm, acknowledges that it can be difficult to find a job at Google with only a coding bootcamp education, but adds that as technology permeates the corporate world, there are many opportunities for graduates to use technology skills in the professional world. He also told Fortune that Affirm will work with students on adjusting their repayments schedules if they need it, and that it's looking into eventually being able to tie repayments to student employment.
Though LendLayer is out of the race, new students still have other options including Climb and Earnest, among other such lenders.
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