This software-school startup doesn't make students pay -- until they score a job

Get programming skills. Pay later
Get programming skills. Pay later

If the students at this software-engineering school don't find a job, they don't pay a dime in tuition.

App Academy is an intensive 12-week software engineering boot camp that employs the "deferred tuition" model. Students pay a refundable deposit up front to ensure they take the course seriously -- but once they graduate from the program, the deposit is returned and they pay App Academy back with 22% of their first year's income.

"It enables us to train a greater number of folks and it helps us succeed," App Academy CEO Kush Patel told CNNTech. "[It's] a win-win."

It's also a risk -- but Patel says it's one that often pays off, as students can command salaries in the $85,000 to $110,000 range. About 70% of App Academy graduates secure jobs within the first three months of their search, and 98% do so by the one-year mark. If the student doesn't find a job, App Academy doesn't get paid.

But there's another big risk: Tuition plans that collect different amounts from students for the same training are technically illegal in New York and California, where App Academy operates.

Patel said the company is currently in negotiations with lawmakers while the tuition model is under review in both states.

Related: Elite colleges can afford to enroll more low-income students

Meanwhile, the deferred tuition model is creating both buzz and debate in higher education too. Purdue University launched its "Back a Boiler" program for the 2016-2017 school year, which funds upperclassmen willing to repay tuition via a percentage of their salaries for 10 years or less.

These "Income Share Agreements" are hotly debated, with proponents saying the model will greatly reduce student debt and critics arguing it's a slippery slope that smacks of indentured servitude. Meanwhile, some interested parties like the state of Oregon have introduced legislation only to get tied in logistics and funding difficulties.

But as the debate rages, for App Academy, Patel says the deferred tuition model is important for students who may not have the tuition cash up front. About 80% of App Academy graduates say they wouldn't have been able to enroll otherwise.

Related: Howard Schultz's advice for the Class of 2017

"The deferred tuition was hugely important to me. It has absolutely changed my life," said Bethany Hyland, an App Academy graduate who found a job at shared-workspace startup WeWork. She's now able to pay down her college debt in addition to her App Academy tuition, she said.

How App Academy works

To help students like Bethany, Patel and co-founder Ned Ruggeri started App Academy with the idea of training novices from scratch. They're not looking for applicants with computer degrees or experience, Patel said. Instead, they seek motivated self-learners.

In the first nine weeks of the App Academy course, students start with the basics of computer programming and quickly ramp up to learn the skills needed to create fully functioning web sites and applications. The last three weeks focus on the job search: Each student puts together a programming portfolio and is trained in practical skills like resume and cover-letter writing, interviewing skills and salary negotiation.

App Academy receives about 20,000 applications each year for the courses in New York and San Francisco, and the school accepts only about 3% of applicants.

Patel credits the deferred tuition program with the high interest in App Academy and the caliber of its graduates: "We have more students that are interested in taking our class, [so] we can be more selective."

CNNMoney Sponsors