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ISAs promised to change education finance. It’s ISAs that are having to change instead.

Protocol Fintech

Hello and welcome to Protocol | Fintech! This Tuesday: Why ISAs are under scrutiny, Rocket Companies buys Truebill, and RadioShack lives — as a DeFi project.

The ISA dilemma

Income share agreements became a popular way for people to jump into the tech industry, rising alongside bootcamps that promised a fast track into high-paying jobs. They’ve offered a way for students to enroll in programs without upfront costs, instead paying a percentage of their future income. And they’ve operated in a regulatory gray area.

But some ISAs have come under fire from the very people they’re supposed to be helping. Two former students of Top Applicant, doing business as Elevate, sued the school and its ISA provider Leif, alleging they were tricked into signing up. After they dropped out, they say they were harassed to pay back the debt.

Income share agreements are drawing more interest from policymakers. With every unhappy bootcamp graduate who shares their story, that interest will only grow.

  • The CFPB recently issued a consent order against ISA provider Better Future Forward, stating that the company falsely claimed its products were not loans.
  • California recently classified ISAs as student loans while licensing startup Meratas to service agreements in California. Illinois also passed a law that defines ISAs as loans.
  • One of the biggest names in ISAs, Lambda School, was forced to make major changes in California. It rebranded as Bloom Institute of Technology and now offers “outcomes-based loans” as well as income share agreements; in California, it only offers retail installment contracts.

The student debt problem isn’t going away. Despite their flaws, ISAs try to address a real problem that hasn’t been solved by educators or policymakers: funding workforce education without weighing down graduates with crushing debt.

  • There’s a reason why investors and founders have flocked to the market. Sure, there’s a big market to tackle. But they also know firsthand the pain of trying to recruit enough skilled workers.
  • ISAs could provide a piece of the puzzle. But it may require rethinking how they work and how they target students. Bloom is offering a tuition refund guarantee, and it makes the amounts owed under various options clear on its website.
  • For-profit offerings may not be the only answer. The Student Freedom Initiative, funded by philanthropist Robert Smith, is a nonprofit that offers ISAs for historically Black colleges and universities. The program provides up to $20,000 per academic year. Students have to pay back 2.5% of their income for every $10,000 they borrow.
  • That’s lower than most for-profit programs — Bloom charges 14% over three or four years — but the Student Freedom payback period can stretch over 20 years. After that, nothing is due even if the students haven’t paid back the full amount.

ISAs are not a cure-all. The agreements seem to work best when training students for high-paying jobs — and when the students are well-qualified to take the courses.

  • No surprise there: The companies and investors putting up the money want a return on their investment.
  • For people who don’t have the basic skills to learn programming in a bootcamp, ISAs may not work.
  • You can get an ISA if you major in the humanities. But it will likely cost you more. Accounting grads pay less than anthropology majors in Purdue University’s “Back a Boiler” program.

The creators of ISAs, kind of like their students, are learning as they go. Given the gravity of the student loan crisis, experiments are worthwhile — but the lawsuits suggest the need for more guardrails. Safer, clearer products could well draw in more well-qualified students, which ultimately helps everyone. Look for regulators to keep studying up in the new year.

— Tomio Geron (email | twitter)


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From Protocol | Fintech

Rocket Companies will acquire Truebill for $1.3 billion. The purchase values Truebill at more than double its previous valuation.

The Consumer Financial Protection Bureau asked for info from top “buy now, pay later” companies. The regulator asked Affirm, Afterpay, Klarna, PayPal and Zip for information on their practices and how they affect consumer debt.


“It could be 10 boats, 12 cars, and then one of the lots is X number of bitcoin being auctioned.” —Jarod Koopman, director of the Internal Revenue Service’s cybercrime unit, on digital assets seized by the agency.

“We intend RadioShack to be the first protocol to pass over into mainstream usage in the history of DeFi.”RadioShack’s website, announcing an apparent plan to revive the once-popular tech and electronics retailer as a blockchain and crypto company.

“Siri, play ‘Ironic’ by Alanis Morissette.”Ripple CEO Brad Garlinghouse on ex-SEC Chair Jay Clayton’s op-ed endorsing blockchain technology.

“Regulation is absolutely important for this sector. If people are using this as an investment asset, then the rules which are there for other investment classes should apply here as well.”IMF Chief Economist Gita Gopinath on cryptocurrencies.

3 questions with Magnus Larsson, CEO of Majority

What fintech trend/issue are you most worried about?

Everything about lending worries me from a consumer perspective. Very few companies [or] none have built a lending product that is both fair and easy to use. But it’s exciting to see that a lot of things are happening in so many areas of lending right now.

What problem do you want to see a fintech company solve?

A global identification system. In a future with more people moving across the world, a simple and smooth solution that doesn't kill your integrity is needed!

What product or service are you totally, even irrationally, loyal to?

Gmail. Since an early invite from a friend that worked at Google, I haven’t used another email ever since. It still is painful from a design perspective to use, but the endless volume was so groundbreaking.

Making moves

SEC Commissioner Elad Roisman is stepping down. The Republican member of the agency announced that he will leave in January.

Deal flow

Thoma Bravo acquired Bottomline. The private-equity firm bought the business payments technology company for $2.6 billion.

Razorpay raised $375 million. The Bangalore-based payments processing company’s series F round valued it at $7.5 billion and was led by Lone Pine Capital, Alkeon Capital and TCV.

Addi raised $200 million. The Colombia-based “buy now, pay later” company’s debt and equity financing was led by SoftBank and GIC Private.

Papaya raised $50 million. The bill payment software company’s series B round was led by Bessemer Ventures.

Proxymity raised $31 million. The digital investment communications software company’s series B round included investments from BNY Mellon, Deutsche Bank and Citi.


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Data point

$140 billion: That’s the value of the total supply of stablecoins at the end of 2021, up 388% from $29 billion last year.

Thanks for reading and making Protocol | Fintech’s first year a roaring success. We’re taking off for the holidays and we’ll be back with you in January.

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