Coding Bootcamp Lender, Skills Fund Acquired by Goal Structured Solutions

Jun 05, 2019

Coding bootcamps promise a speedy vocational education tailored to helping students land high-paying jobs. But cheap they are not: most programs cost upwards of $10,000, and because many are privately operated and unaccredited, they are not eligible for federal loans.

One of the earliest financiers for students attending these schools is Skills Fund. This week, the Austin-based company was acquired by Goal Structured Solutions, a company that manages consumer and student loans. Financial terms of the deal were not disclosed, but all of Skills Fund’s current staff of 15 will join the new owner.

Skills Fund was founded in 2015, around the time when the industry hit “peak” bootcamp as the number of providers and investment capital in them ballooned. Most of these programs typically run for fewer than six months and aim to teach students the coding chops they need to get a programmer job.

Because many of these programs and pedagogies were new and unproven, Rick O’Donnell, Skills Fund’s founder and CEO, says it had to be careful about which bootcamps it would provide loans to. Each provider that wanted to give their students access to Skills Fund’s loans were vetted to ensure that the programs delivered what they promised.

O’Donnell has long argued that lenders (like his company) and bootcamps have an aligned incentive to ensure graduates’ success. The logic goes like this: because Skills Fund only makes money when students pay back their debt, it is in its interest that graduates land jobs with salaries that can support those payments.

When vetting a program, Skills Fund looks at a school’s admissions process, the rigor of curriculum and assessments, time spent to complete the program, and whether graduates actually find employment in the field for which they studied.

It found early on that self-reported information from schools were not always reliable. So in 2017, it was a founding partner of the Council on Integrity in Results Reporting, a coalition of coding bootcamps that created a set of standards around transparency in reporting student outcomes.

Currently, Skills Fund works with more than 70 schools. It has also cut ties with about a dozen providers for a variety of reasons: losing licensure, getting acquired or simply shutting down. The company says it has chosen not to work with about one-third of the schools that have expressed interest.

As O’Donnell puts it bluntly: “We don’t finance students to go to crappy schools.”

Skills Fund primarily services coding, cybersecurity and other technology-focused programs, including those offered by Bloc, Thinkful and Galvanize. It also works with vocational programs in other industries; one teaches power-line repair skills; another focuses on commercial driving training.

To date, Skills Fund has provided close to $150 million in loans to more than 10,000 students. Interest rates for its loans hover from 8 to 10 percent, according to O’Donnell, and the timeframe for repayment typically ranges from 3 to 5 years. (Average federal student loan rates today for graduate and professional school is around 6 percent, but coding bootcamps are not eligible for them.)

In terms of repayment, the results aren’t perfect; O’Donnell shares that a small percentage of students have defaulted on their loans (in the “low single digit”). But he claims the company is currently cashflow positive.

When it launched, Skills Fund had raised $1.5 million in equity financing to cover its operating costs. It secured another $140 million in debt and lending capital, mostly through Iowa Student Loan, a nonprofit based in Des Moine. But as the company expanded to service more programs, it outgrew the capital that Iowa Student Loan could provide. As it looked for other sources of funding, it found an interested party in Goal Structured Solutions.

“The coding bootcamp industry is still growing at a healthy clip,” says O’Donnell. “Our growth requires capital to offer more loans.” According to the most recent estimate from Course Report, coding bootcamps in the U.S. and Canada make up a $240 million industry in 2018. (Its earliest report, in 2014, estimated the market at $59 million.)

Goal Structured Solutions, based in San Diego, claims to be one of the biggest third-party providers of student loan services, managing more than $27 billion in federal and private student loans. In 2017, it offered a $2 million credit facility to Make School, a coding education provider that offers income-share agreements, where students pay no tuition upfront but instead agree to pay a percentage of their future earnings for a set period of time.

Skills Fund has looked into income-share agreements but has not offered them due to ongoing “legal and regulatory ambiguity,” according to O’Donnell. Officials at the U.S. Department of Education have expressed interest in experimenting with ISAs, but it has drawn pushback from Democrats.

Still, offering ISAs remains a possibility for Skills Fund. “We may look again in the future,” says O’Donnell. “At the end of the day, higher education is moving toward outcomes-based funding and financing. It’s going to take awhile to get there.”


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