When Regulation Pays

Regulation stifles innovation, the complaint goes, protecting the status quo and existing institutions at the expense of alternative providers. But it's not always so.

The biggest player in the rapidly expanding boot camp and coding academy space, General Assembly, has been through the regulatory approval process in eight states so far. And the experience hasn’t been too painful. In fact, company officials said it has helped them cope with General Assembly’s growth.

“We found that most states are really eager to collaborate with us and learn about our model,” said Liz Simon, the company’s vice president for legal and external affairs.

In return, Simon said, General Assembly has taken lessons from working with state regulators to set some “baseline rules” and to standardize operations for the company.

For example, state consumer contracts have proven to be useful models, Simon said, in part because they give students a clear understanding of what it takes to be successful in an academic program. She also said required reporting of information to state agencies has given General Assembly better insight into trends across its campuses, allowing the company to anticipate needs as it grows into other areas.

“We’ve learned that serving 100 students is different than 1,000 and definitely different than 10,000,” she said. “Many of the rules at the state level do make sense.”

General Assembly is on target to have more than 20,000 alumni by the end of the year. That’s up from 5,000 at the end of 2013. Simon said General Assembly, which was founded in 2011, currently enrolls roughly 60 percent of all students in the boot camp sector.

Peter Barth is CEO and founder of the Iron Yard, a coding academy with campuses in 19 cities, mostly in the southeast. The Iron Yard, which recently received funding from the Apollo Education Group, owner of the University of Phoenix, has earned a stamp of approval from regulatory agencies in 10 states, with a few others in progress.

The process varied widely across different states, Barth said.

Some state regulators were proactive and practical about adjusting their rules for the Iron Yard, which doesn’t fit the mold of a traditional college -- or any college, really. For example, Barth said, library requirements shouldn’t apply to a coding academy. Regulators typically agreed with that sort of tweak to the rules, although Barth said some were slower and more bureaucratic than others.

Rules for facilities and the qualifications of instructors have been particularly tricky, he said. Simon agreed that the instructor licensure issue is often a sticking point.

Even so, Barth said, “We haven’t had states where we haven’t been able to come through the process.”

Cease and Desist

Last year state regulators appeared to be taking a much harsher view of boot camps, which some call accelerated learning programs. In February 2014, California’s Bureau for Private Postsecondary Education pumped the brakes on the sector’s expansion, big time.

The agency, which licenses educational entities, sent cease-and-desist letters to at least eight coding academies. The companies were told they were operating in violation of state law, and could be fined or shut down if they did not apply for state recognition.

That news caused shudders at the start-ups and among their funders. Even worse, regulators in other states sent similar letters to coding academies and boot camps.

“At the same time that California did that publicly,” Barth said, “a whole bunch of other states did that privately.”

Yet the sector’s worst fears did not materialize. In most states regulators worked with the newfangled providers to come up with an approval process that appears to be working.

“In general, they tell you what they need from you, and you do it,” said Liz Eggleston, co-founder of Course Report, which tracks the coding boot camp space. “And they usually aren’t shutting down schools.”

The sector now includes 67 full-time boot camps, according to a recent study from Course Report. It will have more than 16,000 graduates this year and total revenue of $172 million.

Alan Contreras is a former state regulator from Oregon. He said he likes the boot camp approach.

“It takes a bit of pressure off colleges and universities to be job-training centers,” said Contreras, who directed college authorization in Oregon.

Contreras agrees that the model is unfamiliar to state regulators. But he said it should provoke fewer worries than upstart, degree-issuing colleges do.

“These training camps are so tightly identified to a pre-existing job market,” he said. “They’re not doing general education.”

As for the instruction qualification requirement, Contreras sides with General Assembly’s take: that its instructors’ work experience and teaching skills are more important than where they went to school or what type of degree they hold.

“It’s a question of ‘do they know their stuff?’” he said.

Politically Popular

Boot camps and coding academies have captured the attention of lawmakers on both sides of the aisle in part because they appear to be a workforce development solution -- albeit a narrow one focused on bachelor’s degree holders who want high-paying jobs, largely at technology companies, and can pay thousands of dollars out of pocket for programs that last a few months.

For example, President Obama gave coding academies a welcome plug with the White House’s TechHire initiative. Announced in March, that program seeks to help meet the “urgent” employer demand to fill well-paying tech jobs. TechHire includes collaborations between employers and coding boot camps, as well as with community colleges and universities.

That support extends to prominent Republicans in the U.S. Senate, and to some governors and state lawmakers. That can’t hurt when state agencies consider how to deal with coding boot camps -- giving them the outright boot probably isn’t an option, not that anyone is saying it should be.

Andrew Kelly, director of the American Enterprise Institute’s Center on Higher Education Reform, co-wrote a report on the policy environment for boot camps. The report, which General Assembly commissioned, said the industry’s rapid growth had put state regulators on their guard, for good reason.

“Though the current crop of large schools is remarkable for their rates of success,” the report said, “chances are good that other, lower-quality offerings will emerge to capitalize on the growth of the sector.”

In California, the Legislature prodded the Bureau for Private Postsecondary Education to form a task force to review standards for boot camps and to ensure the promotion of high-quality programs.

The group includes representatives from General Assembly and Dev Bootcamp, another provider that, like General Assembly, has received approval in California. Kaplan Inc., a large for-profit education company, bought Dev Bootcamp last year.

Specifically, the task force is mulling whether the current means of reporting student outcomes in the state is working, and if it should identify the disclosures students receive when they enroll at a boot camp.

In some states, political support for boot camps has been about keeping companies from bolting because they can’t fill jobs locally with qualified tech workers.

Barth said state and federal lawmakers, and other state agencies, have at times called state regulators to encourage them to find a way to work with boot camps because of their “alignment” with workforce development. The message, he said, is “we need this.”

Perhaps the best endorsement of the model has come from students, a growing number of whom are forking over money for short-term training programs because of their high job-placement rates.

The average boot camp lasts about 11 weeks, according to Course Report, with tuition and fees of $11,063.

General Assembly, which is based in New York City, offers three types of programs. Its immersive, full-time offerings in product management, user-experience design and web development are 10-12 weeks long, with a price tag of $10,500 to $13,500. Instructors with experience in those fields teach the courses.

The company’s part-time courses also last 10-12 weeks. But those evening and weekend courses are for students to learn a new skill or to try to “level up” in their current jobs, rather than being trained to make the leap into a different gig. Those courses cost between $2,800 and $4,750.

Finally, General Assembly offers online courses -- in web design and data analysis. They run for the same length as in-person programs, for $1,250 to $1,600.

The company touts solid job-placement rates for its immersive programs. Fully 99 percent of job-seeking students who went through the immersive tracks found new, paid employment within 180 days, General Assembly said. And the job is usually a step up -- General Assembly graduates reported an average increase in pay of 20-30 percent.

Quality and Growth

Boot camps are not accredited, although a few have started partnering with accredited colleges. They do not issue degrees, cannot accept federal aid and are not overseen by the U.S. Department of Education.

As a result, the space so far has existed outside of the reach of two parts of higher education’s “regulatory triad,” having had contact only with state agencies.

That may change soon, however, as the Obama administration wants to create a new, experimental pathway to federal aid and accreditation for boot camps, coding academies and online course providers. The Education Department plans next month to unveil this program, which will exist under its “experimental sites” authority.

That change -- particularly the addition of federal student aid funds -- and the industry’s continued growth likely will pose new challenges. But it also will allow less-wealthy students to enroll in the programs, supporters say.

Robert Shireman, a former Education Department official and prominent critic of for-profit higher education, worries the experimental sites idea “does little” to ensure that the boot camp space isn’t flooded with low-quality programs

“As great as this initiative sounds, the Department of Education should proceed with extreme caution, as history has shown that, whenever you open the federal financing spigot in the education sector, you risk being flooded with low-quality programs run by charlatans,” Shireman wrote in a recent essay for the Century Foundation, where he is now a senior fellow. “The current excellence of some coding academies is no guarantee that they or their imitators will be worth the time and tuition after the sector expands.”

To help prevent this, Shireman says boot camps that participate in the federal aid experiment should make the projects their graduates complete open to inspection by employers or regulators. He also said qualifying programs should face a requirement that some of their tuition prices be covered by students and employers, not just by federal aid. A similar rule has existed, in variably rigorous forms over the years, for the for-profit industry.

For its part, General Assembly hasn’t pushed for federal aid eligibility. And the company’s CEO and co-founder, Jake Schwartz, has expressed misgivings about going down that road -- saying that federal aid tends to contribute to ballooning costs and higher education’s “long-term debt model.”

Yet boot camps appear likely to soon fall under the oversight of the feds and some form of accreditation, at least on an experimental basis. And whether the industry can avert a quality crisis might hinge on the work being done now by the often-overlooked third leg of the regulatory triad -- state agencies.