So what is the next frontier in lending? According to PayPal cofounder Max Levchin, it might just be finding better ways to handle student debt for those who want to go into coding.
Levchin’s latest startup — lending-focused Affirm — has set its sights on student loans, and Levchin is putting his money where his interest is by supporting loans for coding, design and business bootcamps from General Assembly, Bloc, Kaplan’s Dev Bootcamp and Metis.
What is a coding bootcamp? Glad you asked. Coding bootcamps are short, intensive bursts of education in software development, generally ranging from 10 weeks to several months in length. These types of experiences have blown up over the last few years. Their average cost is around $9,900, but that can rise to nearly $20,000 for some of the more expensive providers, according to Course Report. Generally, they aren’t covered by the sort of traditional student loans that people use to pay for education.
Currently, there’s no industry-wide, third-party accreditation or ranking system for these coding schools, and most of them self-publish their own placement rates.
Affirm is growing beyond its roots in online retail lending and thinks it has the platform to solve the problem. Via Affirm, customers can take out the funds they need to attend their bootcamp of choice and then choose to pay back that loan in a 12, 15 or 18-month time span. Interest reportedly ranges from 6 percent to 20 percent.
Repayment begins six months after the loan is taken, and the loans are issued quickly as they are based off a borrower’s name, phone number, birthday and the last four digits of their social security number.
“There’s this desire to improve your social standing. But the living wages in this country have been flat, and access to credit is one way to improve your quality of life,” Levchin told TechCrunch. “You can argue about the consumption side of debt, but one thing that you can borrow for to improve your standing is education. It is the best kind of debt. It’s the most righteous reason to borrow money.”
Affirm is not alone in this business model. Upstart and Pave have emerged around helping potential students finance a trip to a coding bootcamp.
“We’ve partnered where we thought the quality of education was so high that you’ll be able to graduate with a few job offers on hand,” Levchin said.
Levchin also remains unmoved that the new branch of lending being pursued by Affirm is likely to heat up in what some think is a student loan bubble that is heading for a disastrous pop.
“It’s a little bit outside of what we’re doing, but it’s something I’m trying to wrap my head around,” Levchin said. “If you look at the default rates for some of these schools, they’re unbelievably high. Then, of course, these loans are essentially guaranteed by the government. It’s a giant vortex of cash into the ground.”