An income share agreement (ISA) is a way of paying for a course in which the student pays little or nothing up front, and then pays a share of their salary for a fixed number of months after getting a job. In India it is usually called pay after placement. Several coding bootcamps use it.
The agreement fixes four things before the course begins: the share of salary, the number of months, a minimum salary below which nothing is paid, and a cap, which is the most the student will ever pay. If the student does not find a job above the minimum salary within an agreed time, the student usually pays nothing. So the bootcamp earns money only when its students are hired.
Consider a BSc graduate in Vijayawada who joins a bootcamp under an ISA. He pays ₹0 up front. His agreement says that he will pay 15% of his monthly salary for 24 months. He pays only if his job pays at least ₹4 lakh a year, and he never pays more than ₹2.5 lakh in total. Eight months later, he joins a software company at ₹6 lakh a year, which is ₹50,000 a month. So each month he pays ₹7,500 to the bootcamp. After 24 payments, he has paid ₹1.8 lakh. This is less than the cap, so the agreement simply ends.
Before the payments start, the bootcamp must confirm the job and the salary. It can ask for the offer letter and the salary slips, or it can use income and employment verification, which confirms a person's salary from the employer's payroll records.
Who carries the risk? The bootcamp does. If many of its students do not get jobs, it earns nothing from them. For this reason, many bootcamps test applicants before they admit them.
In law, an ISA is close to a loan. In India, a company that lends money as a business needs a licence from the RBI, either as a bank or as a non-banking financial company (NBFC). The difference is explained in NBFC vs bank. So many bootcamps arrange the ISA through a lending partner that holds such a licence, and the monthly payments are collected like EMIs.
How is an ISA different from an education loan? An education loan has a fixed EMI that the student must pay whether or not they get a job. An ISA's payments depend on the salary, and they are zero if there is no job. A similar idea appears in business lending. In revenue-based financing, a business repays a loan as a share of each day's sales, so its repayments rise and fall with its income.