Skills Fund Aims to Be Accreditor, and Creditor for Coding Schools

The creation of Skills Fund, the Austin, TX-based startup that makes loans to people enrolling in coding and Web development bootcamps, started with two ideas.

The first is that students should have access to loans that are easy to understand and that state the terms of the loan—such as knowing exactly what interest rate they will pay—up front. Second, the quality of the school should also impact whether the lender will give a student a loan.

Thus, Skills Fund, an alternative lender that researches both the school and the borrower who attends it to determine who to lend to, was born. Last week, the program received $11.5 million in seed funding to help it start making those loans. The funding round was led by Iowa Student Loan, a nonprofit that has provided $2.6 billion in federal and alternative student loans.

While the Skills Fund has some basic credit requirements for students who want to borrow money—if you recently defaulted and on another loan, you probably won’t meet them—the company also underwrites the loans based on the quality of the bootcamp and coding school, a factor that is perhaps more important, according to founder and CEO Rick O’Donnell. If a school meets its requirements, most of the students who attend can get a loan.

The idea behind it is that most of these students are leaving a job in order to get the training to gain a higher-paying one, O’Donnell says, so they should be measured based on what their education can help them achieve. “By doing our due diligence with the schools and partnering with them, we’re able to price the credit on the back end in a way that doesn’t differentiate the interest rates for the borrower,” he says.

Skills Fund announced six programs (Dev Bootcamp, Metis, Galvanize, Hackbright Academy, CodeU, and Sabio) last week as its “partners.” That means that the schools meet a group of quantitative metrics and qualitative criteria that Skills Fund has set.

“What we really needed was an accreditor for quality assurance of the innovative higher ed space,” O’Donnell says. “We’re really trying to help identify the best programs, and then provide a really high-quality financing tool to expand access to those programs.”

The need for financing these short-term programs, which on average cost $11,000 and can last for multiple months, has become more pronounced as the programs expand their reach nationally. The number of students expected to graduate may double to 16,000 this year, according to market research website the Course Report. Xconomy’s Bruce Bigelow reported last week that San Francisco-based training program Dev Bootcamp is expanding to San Diego, where it will offer a 19-week training course, in just the latest move in a growing, national competition among coding educators.

In order to get a loan from Skills Fund, a student must attend one of its “partner” programs, which the company has vetted as a quality school. The fund will soon be adding more schools to the list of six it has approved so far, O’Donnell says, though he said he couldn’t provide more details about which schools or when they’d be added.

Skills Fund does due diligence research into a variety of metrics, O’Donnell says, including … Next Page »

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David Holley is Xconomy's national correspondent based in Austin, TX. You can reach him at dholley@xconomy.com Follow @xconholley

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