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They also make money by reselling ISAs to hedge funds. This could stop happening in a few years if the ISAs don’t pan out, and the hedge funds stop buying them.
by sandofsky 7y ago
They also make money by reselling ISAs to hedge funds. This could stop happening in a few years if the ISAs don’t pan out, and the hedge funds stop buying them. But right now the school is protected regardless of outcome.
The other issue is that bootcamps can collect that money even if they provide no value. Say a student gets nothing out of the bootcamp, and spends the next three years on rigorous self-study.
The only upside for students is if the bootcamp fails, and they totally give up on a career in programming. If you have an ISA hanging over your head that might cost you upwards of $30k, I’d say it’s more likely you’ll give up than if you blew $7k up-front.
- tempsy 7y agoi've not heard that about reselling ISAs. what's the source? which camps do that? the "other issue" is not true of the ones I've seen. most ISAs have an expiration date far shorter than 3 years. the ones in SF I've seen are 1 year. the "catch" that most people don't talk about with ISAs is that you have to actively job hunt and the school with hold you accountable for that e.g. submitting an minimum number of applications a week, going to networking events, reaching out to recruiters, etc., and if you fail to meet a minimum weekly threshold then you could trigger repayment. that is a big motivation to keep trying to get that first job.
- sandofsky 7y agohttps://www.wired.com/story/how-we-learn-lambda-income-sharing-agreements/ https://www.wired.com/story/how-we-learn-lambda-income-shari... "In the meantime, Lambda shifts the equation: For about half of the ISAs, the company sells the rights to a portion of its returns to investors; in return, it gets cash up front." You can even see a "Sample Offering" for Lambda School on Edly, a marketplace for reselling ISAs: https://edly.info/investors/ https://edly.info/investors/
- tempsy 7y agoOk got it - but what's the issue? This is similar to invoice financing, which is a pretty common practice. The only way I see this impacting student outcome is if the school loses motivation to help students post-graduation, but the discount for selling these ISAs must be very high.
- austenallred 7y agoBingo. ISAs are financed one way or another, whether it’s with VC or with an ISA-backed financing mechanism. Lambda School is still on the hook and loses money until the students are placed and have paid back. It’s about incentive alignment.
- barry-cotter 7y agoYou do realize Lambda has to persuade investors that these ISAa will pay off, right? They’re still highly motivated to get their students making money either way. If they hold the ISA and the student doesn’t make any money they don’t make any money. If they sell the ISA and their students don’t make any money soon they won’t be able to sell them and then they don’t make any money.
- Canada 7y agoNever underestimate people's willingness to grab money now even when the rational long term strategy would ultimately pay more.
- smnrchrds 7y agoI'm not the OP. I don't know of a good source. I just want to point out that the second tweet in the linked Twitter threads talks about reselling ISAs.
- austenallred 7y agoThat’s not how ISA-backed financing is structured.
- sandofsky 7y agoOh, hi Austen! For some reason you've blocked me on Twitter. Since I have you on the line, maybe you can answer a question. I've had a few email exchanges with California' Bureau for Private Postsecondary Education. They fall under the Department of Consumer Affairs, and they were put in place due to California's problems with diploma mills. The BPPE told me that because Lambda School is operating illegally, if a student has an issue with your company, it's impossible for the BPPE to do anything. Would you agree students should know about this risk, since many of them are likely in a position where they can't afford legal representation?
- austenallred 7y agoHi! We submitted our application to the BPPE almost a year ago, and we’ve been in close contact with them and working directly with the BPPE since then. There’s a lot happening behind the scenes we can’t talk about publicly just yet, but hopefully soon!
- sandofsky 7y agoYou didn't answer my question. Is what the BPPE saying incorrect? If it is correct, don't you think students should know about this?
- jcaprani 7y agoYou don't understand! Austen has zero intention of answering you! If you could please stop bothering him with your plebeian concerns, that'd be great!