This transcript was generated from the episode audio and may contain minor errors.
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Some cool things are happening in the world of higher education, which of course, as you probably know, has changed a lot in the past decade or two. But one thing that hasn't changed, at least until recently, and still hasn't changed on a widespread basis, is the skyrocketing cost of tuition. I don't need to tell you how expensive college tuition is, especially if you're in the United States, especially if you have been paying for college tuition or are paying for someone else's college tuition, and even if you're not, you're probably aware that it's pretty expensive. So in today's question, a listener is wondering about this new thing called Income Share Agreements, or ISAs, and they have an opportunity to go to school as part of an ISA, if I'm not mistaken, we'll hear her question in a moment, where tuition isn't due until after graduation. That's the key point.
So what is this all about? Is it a good deal? And of course, we're gonna look at it through the lens of side hustle school, 'cause that's what it's all about here. We're looking at micro entrepreneurial projects. So are there opportunities like this for side hustlers to learn about entrepreneurship?
Can you in fact learn now, pay later, et cetera? I have some thoughts on that. So first, a quick shout out to our sponsor. Thank you, sponsor. Thank you, listeners.
Really appreciate you. And then let's hear from Megan. [Music]
Hey, Chris, this is Megan, and I've recently learned about income share agreements. As best as I can tell, this is where someone goes through an educational program for free in exchange for a portion of their income for a certain period of time after they graduate. It seems pretty cool.
Back when I went to college, there was no guarantee about anything. All you had to do was pay up and hope for the best. Do you have any thoughts on this? And are there any income share programs for entrepreneurship? Looking forward to what you have to say about this.
[Music]
Megan, thank you so much for the question. And now that I hear that question again, I should revise my introduction where I said Megan has the chance to go to college with an ISA. It sounds like Megan's more in a situation like me in which ISAs didn't exist when she went to college. But she is now looking at this new horizon, which is not only for traditional undergraduate education. So income share agreements, let's break it down.
One of the first and most well-known examples is the Lamba School, which is a programming school, like a coding school. And you don't pay tuition until you're earning $50,000 a year. The way it works, if you go to lambaschool.com, you can learn more. You agree to pay 17% of your post-Lambaschool salary for 24 months, but only after you're making that $50,000 a year at least, and they have a cap at $30,000. So basically you never pay more than $30,000 for your tuition.
And if you don't get hired, then you never pay. So isn't that pretty cool? Like they also have options to just pay tuition upfront if you're able, and that's what you prefer. But to me, the groundbreaking thing is this income share agreement because it's allowed a lot of people from poorer countries or from a disadvantaged background to really get a world-class education and then a high-paying job. So there are a few other schools that are offering similar programs.
I just did some brief research and saw the University of Utah is doing it, Purdue University. But in the world of entrepreneurship, to kind of focus our discussion here, most ISAs are from startup incubators. One of the big ones that you may have heard of is called Y Combinator. And their deal is, well, first of all, they're very selective, so you can't just apply and get in, like a lot of people who apply don't get in. But if you are accepted, their deal is they will invest $125,000 in return for 7% of your company, okay?
And that would be great if you qualify, first of all, as I said, and also if you need more than $100,000 in startup capital. So there is a world in which that is the case for lots of different businesses. But here on Side Hustle School, 99% of stories that I feature, you don't need anywhere near that much money. Our whole point is to do this frugally, to do this on a budget, to use the resources you have, instead of just trying to find somebody to invest money. So the reason ISAs exist, which as I said overall, I think they're awesome, but the reason they exist is because of expensive tuition or startup costs for some businesses.
So if you were attending a college that was affordable for your budget, then you wouldn't need the ISA. And so too is it for the side hustle model. Like if your total startup costs are $500, let's say, which we've had hundreds of stories that fit in that category, then an ISA wouldn't really be worth it for either party. Like you don't need somebody to own X percentage of your company in exchange for that $500. You should just find a way to get the $500 or less on your own so that you don't have to give up any equity in your company.
So that's what I think about that. I do think ISAs are awesome for lots of things. I'm not quite sure how they apply to the side hustle world, but definitely some parts of entrepreneurship for sure. Thank you, Megan, for bringing it up. Hopefully it's helpful to somebody.
Go and Google ISAs income share agreements if you'd like to learn more. I definitely learned a few things myself as I was working on this episode. All right, listeners, if you have a question of your own, come to sidehustleschool.com/questions. We will feature them throughout the year, along with updates from other listeners as they launch their projects. Thank you so much for tuning in.
I hope you'll come back tomorrow. You can subscribe or follow wherever you get your podcasts. My name is Chris Guillebeau. You're listening to "Side Hustle School." [Music]
- From the Onward Project.
