Blair Launches $100M ISA Fund for Students

Income-Share Agreements and the Rise of Blair Capital

Income-share agreements (ISAs) are increasingly recognized as a viable financing option for students, especially those attending alternative educational institutions such as coding boot camps and vocational schools. Extensive analysis has been conducted regarding how these financial instruments can align the incentives of both students and colleges, fostering improved career outcomes.

However, a significant obstacle to the broader implementation of ISAs has been the limited availability of funding for these models.

Blair Secures $100 Million Debt Facility

This landscape is evolving, with companies like Blair at the forefront of change. Blair recently announced the successful acquisition of a $100 million debt facility, establishing what they term “Blair Capital.”

The funds will be utilized to finance ISAs at partner institutions. The investment originates from an unnamed investor, described by Blair CEO Mike Mahlkow as an “institutional capital partner” managing assets exceeding $10 billion.

From Direct-to-Consumer to Institutional Servicing

Blair was initially highlighted by TechCrunch following its emergence from Y Combinator in the summer of 2019. Originally, the company concentrated on a direct-to-consumer (D2C) ISA model.

Students would approach Blair to secure an ISA, receiving upfront capital to cover tuition and living expenses, and subsequently select a school to attend. Underwriting decisions were based on the prospective income potential of each student.

Blair’s technological infrastructure facilitated the servicing of ISAs, encompassing payment collection, requirement tracking, and providing students with updates on their remaining obligations. However, to achieve substantial growth, Blair required capital to directly underwrite ISAs and expand loan volumes.

The company pursued a debt facility, but faced challenges when the COVID-19 pandemic emerged. Mahlkow explained that securing debt capital for D2C ISAs proved “very, very difficult” during this period.

Simultaneously, a surge in demand from educational institutions, particularly alternative schools, became apparent.

The Evolution of Blair’s Platform

Consequently, Blair adapted its platform – now known as Blair Servicing – shifting its focus from D2C lending to providing a technology servicing layer for schools offering ISAs as part of their programs. This led to the creation of Blair Capital, the newly established $100 million facility.

Partner schools can now leverage Blair Capital to fund their ISA programs, eliminating the need to independently raise debt capital if they choose.

Underwriting Shifts to Program Quality

Unlike Blair’s initial consumer-centric approach, underwriting for ISAs is now centered on the quality of the educational institution and, more specifically, the individual program. Instead of evaluating individual students, Blair assesses the established return profile of specific programs.

This allows for underwriting ISA terms that align with the associated risk.

Flexible ISA Terms

ISA terms exhibit considerable variability across programs. Mahlkow indicated that the company maintains only minimum and maximum limits on terms, offering substantial flexibility.

For example, Blair generally avoids income-sharing agreements exceeding 20% and implements repayment caps and time limitations, with most ISAs spanning 1-2 years, and a maximum of three years.

Supporting New and Established Schools

Schools with a proven record of student success can immediately utilize Blair Capital. For newer institutions lacking an extensive operating history, Blair provides guidance in establishing the necessary track record for future ISA underwriting.

Regardless, all schools can utilize Blair Servicing to manage their ISA loans.

Blair’s Revenue Model

Blair Servicing charges a percentage fee on the funds received from ISAs post-graduation. Blair Capital, on the other hand, collects an origination fee and participates in the overall gains of the ISA itself.

This structure aims to align the interests of all parties involved.

Based in San Francisco, the company maintains a small team of six employees. However, with $100 million in capital dedicated to funding ISAs, Blair anticipates a significant impact on this developing industry.