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Good riddance, when I first heard about this I was appalled. It's basically an extremely high interest loan, combined with bizarro access to banking records. L

Good riddance, when I first heard about this I was appalled. It's basically an extremely high interest loan, combined with bizarro access to banking records. Like for most of these ISAs if you couldn't make the payments, they want it access to your bank account to see that you really couldn't. You have this really strange setup where if your income increases even marginally, the ISA kicks in. Lambda school, which fortunately also collapsed was notorious for this. Student loans aren't necessarily bad, they just need harder. Caps. Like federal loans are very reasonable, private ones are not. Outside of attending medical school or law school, private loans are just a bad idea. On top of that, I think private loans are given out too willy nilly. Anyone can go to a bottom tier law school and take out $200,000 worth of loans. A good compromise here would be to make private loans fully forgivable, but federal loans are a fantastic deal and help me improve my life. 40k in student loan debt, which is about the max you can take out federally for undergrad, isn't bad. Anything above 100k can easily be insurmountable, the interest just accumulates way too fast for most people to pay it off. Then again, I never understood why lambda school needed to be so expensive. You're not running a real school, there's no reason you can't just tell people to take a free class off YouTube, and then have them pay $500 or so to have a project graded. And maybe more adventurous companies would be open to recognizing that project as proof you'd be a good hire.

soneca 5y ago
> ”there's no reason you can't just tell people to take a free class off YouTube, and then have them pay $500 or so to have a project graded” I think there is a reason you can’t do that. People won’t learn to program with that. I do not defend Lambda School anymore, but I think you are oversimplifying things to make your point. Which, for me, has the opposite effect of thinking less of your point when you oversimplify like that.
- 999900000999 5y ago
  As far as I'm concerned, that's more than enough to at least give someone an interview If they can complete a difficult project, and get though a whiteboard interview, why not hire them as a junior developer. Just because someone paid 30k for a boot camp doesn't mean they can code.
  - runnerup 5y ago
    I think the issue is that there is demand for a reputable (hirable) $3,000-30,000 program which can teach you to program in less time and/or more flexible schedule than traditional university. I think one good solution is Western Governor’s University which falls in that price range and is extremely flexible on timeline. But honestly there are a lot of students who want high quality intensive instruction but cannot attend a top-10/20 university. It’s very very hard for most people to find high quality learning outside of those programs unless you get extremely lucky to be in the Bay Area or at a company which can provide an environment full of experts to learn from.
  - Jach 5y ago
    I think the issue being criticized isn't about credentials, which smart companies don't care much about already, but about ability to learn. Your oversimplification of equivalent education being to just watch a free series of videos and get graded on a project has the same flavor as just telling people to teach themselves. I mean, learning on your own is certainly a thing, especially in our field. My own beginnings were self-taught from a book. But structured environments are important, too, and for many people the only chance they'll have of learning something, because they can't or won't otherwise. Does the "cost" (which we're calling a flat $X as if it were paid upfront, ignoring the ISA details) have to be so high for these bootcamps? Probably not, but if you're going to attempt to replicate something like a structured experience, your costs aren't going to be nothing. But that's beside the point, since in the style of "charge more" advice from startup founders, if you're trying to build a business, your cost is what the market lets you get away with, not what some randos on the internet not in your target customer base think is "fair".
    - 999900000999 5y ago
      >has the same flavor as just telling people to teach themselves Worked for me. Noting bad happens if you open up VS code and write bad Python. I wanted to make games with my friends, subsequently I learned enough to get an entry level job. What about the Odin project, that's free. Coursera is very inexpensive. I'd advise at least trying that before blowing 30k. Particularly if these bootcamps are fudging placement numbers.
devteambravo 5y ago
Not only did Lambda School crash and burn (Bloom Tech Institute rebrand = LOL). But those of us who managed to not give up and actually learn in other ways... are still on the hook for that ISA repayment. What a monumental scam.
- tetsusaiga 5y ago
  Since apparently it's not connected to credit score, what stops you from just not paying it? If small claims court is genuinely their only recourse, that sounds like something I might try my odds in, especially if I have a compelling case that I've been screwed.
  - deleted 5y ago
    [deleted]
- imtringued 5y ago
  Maybe all we need for education is a room and a minimum wage employee making sure we are actually studying. After all, education happens in the students head, not the teachers. I'm just thinking out loud. Lambda school obviously failed to deliver on its promise but what if we can deliver the same service for very little money?
dragonwriter 5y ago
> 40k in student loan debt, which is about the max you can take out federally for undergrad, isn't bad. The max for undergrad federal loans is $57,500.
- sarchertech 5y ago
  That’s the overall max, but the increasing yearly limits mean you can’t reach that unless you take more than 4 years. If you finish in 4 years, the max is about $45k
divbzero 5y ago
What about the alternative to ISAs proposed by OP? Better than an ISA is an income-dependent loan with some minimum amount that must be paid back regardless of the program outcome. With this setup: 1. You concede and comply with the existing regulation 2. You get access to the existing capital markets so financing costs come down 3. You can use credit reports as a way to enforce the contract so collection rates go up 4. Consumers already understand debt And, most importantly, the consumer gets a better deal than a classical loan. Similarly a bad idea relative to plain old federal loans?
- twblalock 5y ago
  Federal student loans already have income-based repayment options, along with forbearances and public-service loan forgiveness options. I don't see how this proposal is a better deal.
  - ummonk 5y ago
    It’s basically a proposal to do the same thing for private loans. Unlike the federal government, the originator of a private loan will care about repayment rates, thus somewhat aligning incentives.
giansegato 5y ago
I'm not following. Afaik Lambda didn't collapse. It recently rebranded due to a trademark conflict, but they're still alive and well from what I gather. Someone be so kind to explain?
- ilamont 5y ago
  Lambda School leaked documents show poor performance over the last two years https://news.ycombinator.com/item?id=28989092 https://news.ycombinator.com/item?id=28989092 Lambda School agrees to end deceptive educational financing practices https://news.ycombinator.com/item?id=26946972 https://news.ycombinator.com/item?id=26946972
- gonehome 5y ago
  There's nothing to follow - most of the comments here are wrong. ISAs align incentives between teaching institutions and students, they're strictly better than the tuition model. They don't fix all issues because they still require selectivity on admissions (since the school needs to students to succeed in order to survive). ISAs are also not guaranteed to be good, but the ones originally used by Lambda School were good (Lambda School is somewhat of a third rail topic on HN, so it's worth just considering the terms). - Only require repayment if students gets a software job making >50k. - Payment was bounded to 10yr or 30k whatever happens first. Compare to college tuition which charges huge sums of money often paid for by non-defaultable loans and schools don't really care if students ever get employed by anyone. From his tweet thread conclusion: 1. Consumers are confused by ISAs 2. And when they take the deal, they often behave poorly 3. And when they behave poorly, you don't have great recourse 4. And there's a looming regulatory threat 5. And the financial markets aren't supportive My takeaway from this is that it's harder to build an incentive aligned business that really gets students to succeed than it is to take their money as tuition and not have to worry about that so much for business building. I guess I'd argue no shit - that's why ISAs are better, they force the companies to be good at getting positive student outcomes because it's an existential risk if they don't. That's kind of the entire point.
  - michaelt 5y ago
    > ISAs align incentives between teaching institutions and students, they're strictly better than the tuition model. Well, there's two ways you could operate an ISA: 1. You invest $20k in each student, carefully selecting only the applicants who are most likely to succeed, and giving them the most impactful, high-ROI courses you can, so that they almost all repay at least $20k 2. You invest $500 in each student using prerecorded video classes and assignments graded by unpaid 'mentors', take on far more students, and every time you luck into a student who repays $30k that's pure profit, baby.
culi 5y ago
If anyone's interested, I'm a bootcamp grad with a current ISA. The ISA I currently have: *pros*: - zero interest - whatever hasn't been paid after 5 years, I don't owe - no payments are due if you don't have a job making over $50k *cons*: - tuition was definitely overpriced and you end up having to pay 150% of the principal loan (assuming you have a high enough paying job for long enough within those 5 years) - a lot of bureaucracy you have to go through to prove you don't have >$50k salary It definitely sounded scary when I first heard of them. And at the point I was in the bootcamp we were literally dumpster diving and shoplifting to get us through till rent was due and our foodstamps were renewed. Recently got hired with $90k salary so it worked out, but I was very aware of the fact that I was in no position to negotiate and could easily be taken advantage of EDIT: To clarify, zero interest means zero interest. The 150% is the terms of the ISA agreement. You pay 10% of your paychecks to them until it's either been 5 years or you've payed 150% of the principle amount. Most people that get jobs in tech will have paid the 150% before the 5 year mark
- culi 5y ago
  To be clear, this essentially means if I go through this program and end up working at McDonalds for 5 years, all I have to pay is through the labor of bureaucracy
  - dwattttt 5y ago
    Only if the program doesn't teach you the meaning of the term "opportunity cost"
    - wutbrodo 5y ago
      The unqualified word "pay" is universally understood among English speaker not to include opportunity cost. When someone asks "how much did you pay for that big Mac", people answer "$3", not "$3 plus twenty minutes to walk there and five minutes in the store"
  - imtringued 5y ago
    What if you go to a bootcamp, get saddled with an ISA and then work at mcdonalds and somehow get a better job that has nothing to do with the bootcamp? The bootcamp gets your money. Quantity over quality.
gruez 5y ago
>It's basically an extremely high interest loan, Yeah, because there's adverse selection going on: "But people with high credit scores tend to have better, cheaper options than ISAs". All the academically successful student can get student loans/scholarships to traditional 4 year programs, so you're left with people who are genuinely bad mixed with diamonds in the rough. Because of this, you have to charge more to make up for the bad application pool. I'm not sure why this is worth complaining about. It's like complaining that lawyers who work on contingency overcharge compared to ones that work by hourly. >A good compromise here would be to make private loans fully forgivable So basically turn them into unsecured loans with sky high interest rates?
- eek2121 5y ago
  Do you have any idea the issues that would solve? Warning: US centric post below. If you could file bankruptcy on private student loans, education costs would plummet overnight. Before you claim that education quality will go down, MOST of the money for both private and public colleges/universities ends up somewhere else beyond education. Football stadiums, expensive ad campaigns, fancy buildings, large marketing departments, even political lobbying. Kill off untouchable private loans and place restrictions on public loans then you will see money flow in the right direction. ISAs are foolish, regardless, because you don't need a degree to write code or manage infrastructure. My income was near $400,000 last year, and I not only didn't go to college, I dropped out of high school due to being homeless. In either W2 or contractual work, I've NEVER had a company question why I did not have a college degree. I understand some folks need the structure, and I think those folks need to be protected. For non engineering jobs or more structured jobs, ISAs are borderline criminal. For everyone else? Unless you like throwing away money that you don't have, stay away.
CPLX 5y ago
I learned from your comment that Lambda School fell apart a couple months ago. And I'm a pretty regular HN reader. Pretty interesting in the context of the founder being super active on social media. The denouement is always quieter I guess.
- mathattack 5y ago
  I think they just rebranded.
- barry-cotter 5y ago
  Rebranded (to avoid getting sued for using someone else’s trademark) https://www.bloomtech.com/ https://www.bloomtech.com/ > The online coding school that invests in you > Train remotely to become a software engineer or data scientist and pay nothing upfront until you are earning $50k or more
duped 5y ago
Federal student loans are a major driver behind increases in college tuition costs (1). Like you say, debt isn't necessarily bad - but there's a strong argument that subsidized debt and the lack of risk in granting loans just gives a bigger pool money for institutions to take from. Point being, federal loans are not a good deal. Each dollar you borrow effectively increases your tuition by 60 cents. (1) https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr733.pdf https://www.newyorkfed.org/medialibrary/media/research/staff...
mathattack 5y ago
Did Lambda fold or just rebrand?
imtringued 5y ago
I don't think the problem is that it is a loan. The real problem is that you can manipulate people to sign up for the ISA and then give a low cost bad quality service. If you scale this up high enough, there are going to be people whose income is going to increase above the threshold just through chance alone. If you provide some low quality MOOC that costs you very little per person then you basically get to take a share of someone's income without providing any value. If the institution was accredited and there were inspections and punishments to keep quality above a certain threshold the model might work but right now it basically invites companies to operate like scammers.
- deleted 5y ago
  [deleted]
ransom1538 5y ago
"2. And when they take the deal, they often behave poorly 3. And when they behave poorly, you don't have great recourse" Yes. As it turns out when you invest in people with no skill, background or money - your investment goes to zero (excluding outliers). For companies like ycombinator the outliers are everything. But in this horrendous business model they can't capture the outliers' profits without being exploitative. If you honestly sat me down for 4 hours I couldn't think of a worse idea. Uber for cats? Rating people with a general global score? Selling loans to people out of rehab. I can't do it. First 15 minutes you learn in any loan business is: Income, Debt-to-income Ratio, Collateral. If those are out the window - you are either better than a trillion dollar loan system - or completely insane.
FastMonkey 5y ago
"Regulatory arb" makes it sound like they did some clever financial engineering to conjure money out of this air. It actually means they were able to skirt regulations meant to put a limit on the interest rates that borrowers pay.
- lmm 5y ago
  I think everyone in finance knows "regulatory arb" is the polite term for "we found a legal loophole".
throwawaygh 5y ago
The thread admits that savvy financial consumers have better options: > Second, credit scores were the most predictive variable of good participant behavior for us. But people with high credit scores tend to have better, cheaper options than ISAs. And then claims that the simplicity of the instrument makes them a better option than debt ("simplicity" isn't a virtue if the alternative is middle school pre-algebra levels of "complicated" and comes at much lower prices): > Furterhmore [sic], consumers were consistently confused by ISAs and had a vague sense they were exploitative. I think ISAs are less complicated than debt, but consumers don't have experience with then. His TL;DR has borderline misleading levels of... interpretation. The real story is that ISAs are exploitative and most consumers -- ESPECIALLY the ones who might actually do okay in life -- can't be "educated" out of seeing that an obvious raw deal is an obvious raw deal. So you're left exploiting the folks everyone else considers too risky, who, it turns out, are... too risky. Like... he says so himself, in so many words.
maxerickson 5y ago
The rebranded Lambda School still offers ISAs: https://www.bloomtech.com/tuition/income-share-agreements https://www.bloomtech.com/tuition/income-share-agreements So they didn't go away and Lambda didn't completely collapse. The outcome based loans aren't better, they don't have a payment cap and don't expire if you get a job offer above $50,000 a year. I wonder if they offer every graduate a teachin' position.
rayiner 5y ago
I think we’re between a rock and a hard place. We can’t tighten the student loan spigot. We have held out college as the route to upward mobility for everyone, especially Black people and immigrants, and the demographics of the people who will be excluded from tightening student loans will make it politically toxic. In view of that I see no alternatives to price controls. Any school that takes federal student loans can charge no more than $X,000 annually. I hate price controls but I don’t see the alternative in a market where government policies otherwise both goose demand and limit supply.
- rwmj 5y ago
  Price controls are being tried out in the UK and it doesn't work - every institution charges the maximum, so it's no longer a ceiling but simply the price everyone pays annually to go to university (£9,250 at the moment).
snicker7 5y ago
If it weren’t for private loans, it would have been impossible for me to go to college.
deepGem 5y ago
I never fully understood why students would go to a bottom tier law school and take out 200K in loans, when you very well know the value of a bottom tier law school. I mean, today is not the lack of information age. You can pretty much find out all the data points needed about a school. For instance, bottom tier schools typically don't advertise the graduating salaries or employment data. Just this one data point is an indicator of future earnings potential. That being said, top law schools or top schools for that matter are within reach for low income individuals as long as they clear the entry criteria.This entry criteria is a whole another debate but Lambda and other schools also have an entry criteria. There are need based scholarships and I think Stanford/MIT/Berkeley offer free tuition if your parents earn less than 100K per annum or something like that. So opportunity is definitely there but then not everyone can make it to Stanford, yes but that doesn't mean you saddle yourself with a huge debt by going to a lower tier school, knowing that your loan repayment capacity will be very low in the initial years of post graduation employment.
- lmm 5y ago
  > when you very well know the value of a bottom tier law school. I mean, today is not the lack of information age. You can pretty much find out all the data points needed about a school. For instance, bottom tier schools typically don't advertise the graduating salaries or employment data. Just this one data point is an indicator of future earnings potential. You're thinking about this from a very different set of life experiences. Not everyone knows to look for things like that. Not everyone even realises that there are different tiers of law schools. If no-one in your neighbourhood has ever met a lawyer socially, why would you?
  - JCharante 5y ago
    But people do have an understanding that some schools are better than others. That's why Harvard has prestige and is well known even in those neighborhoods and some random school doesn't.
    - lmm 5y ago
      They might have an understanding that Harvard is something famous. They probably don't know that that translates into earning a whole lot more. I certainly didn't.
bau5 5y ago
> Lambda school, which fortunately also collapsed was notorious for this. This statement seems to be going unchallenged. It wouldn't surprise me, but if you check @BloomTech and @Austen on twitter, you can see they're still talking it up: https://twitter.com/BloomTech https://twitter.com/BloomTech https://twitter.com/Austen https://twitter.com/Austen
wodenokoto 5y ago
ISA, from a high level perspective, is a private, capitalistic institution, trying to prove that taxes makes both parties come out on top.

soneca 5y ago

> ”there's no reason you can't just tell people to take a free class off YouTube, and then have them pay $500 or so to have a project graded” I think there is a reason you can’t do that. People won’t learn to program with that. I do not defend Lambda School anymore, but I think you are oversimplifying things to make your point. Which, for me, has the opposite effect of thinking less of your point when you oversimplify like that.

999900000999 5y ago
As far as I'm concerned, that's more than enough to at least give someone an interview If they can complete a difficult project, and get though a whiteboard interview, why not hire them as a junior developer. Just because someone paid 30k for a boot camp doesn't mean they can code.
- runnerup 5y ago
  I think the issue is that there is demand for a reputable (hirable) $3,000-30,000 program which can teach you to program in less time and/or more flexible schedule than traditional university. I think one good solution is Western Governor’s University which falls in that price range and is extremely flexible on timeline. But honestly there are a lot of students who want high quality intensive instruction but cannot attend a top-10/20 university. It’s very very hard for most people to find high quality learning outside of those programs unless you get extremely lucky to be in the Bay Area or at a company which can provide an environment full of experts to learn from.
- Jach 5y ago
  I think the issue being criticized isn't about credentials, which smart companies don't care much about already, but about ability to learn. Your oversimplification of equivalent education being to just watch a free series of videos and get graded on a project has the same flavor as just telling people to teach themselves. I mean, learning on your own is certainly a thing, especially in our field. My own beginnings were self-taught from a book. But structured environments are important, too, and for many people the only chance they'll have of learning something, because they can't or won't otherwise. Does the "cost" (which we're calling a flat $X as if it were paid upfront, ignoring the ISA details) have to be so high for these bootcamps? Probably not, but if you're going to attempt to replicate something like a structured experience, your costs aren't going to be nothing. But that's beside the point, since in the style of "charge more" advice from startup founders, if you're trying to build a business, your cost is what the market lets you get away with, not what some randos on the internet not in your target customer base think is "fair".
  - 999900000999 5y ago
    >has the same flavor as just telling people to teach themselves Worked for me. Noting bad happens if you open up VS code and write bad Python. I wanted to make games with my friends, subsequently I learned enough to get an entry level job. What about the Odin project, that's free. Coursera is very inexpensive. I'd advise at least trying that before blowing 30k. Particularly if these bootcamps are fudging placement numbers.

devteambravo 5y ago

Not only did Lambda School crash and burn (Bloom Tech Institute rebrand = LOL). But those of us who managed to not give up and actually learn in other ways... are still on the hook for that ISA repayment. What a monumental scam.

tetsusaiga 5y ago
Since apparently it's not connected to credit score, what stops you from just not paying it? If small claims court is genuinely their only recourse, that sounds like something I might try my odds in, especially if I have a compelling case that I've been screwed.
- deleted 5y ago
  [deleted]
imtringued 5y ago
Maybe all we need for education is a room and a minimum wage employee making sure we are actually studying. After all, education happens in the students head, not the teachers. I'm just thinking out loud. Lambda school obviously failed to deliver on its promise but what if we can deliver the same service for very little money?

dragonwriter 5y ago

> 40k in student loan debt, which is about the max you can take out federally for undergrad, isn't bad. The max for undergrad federal loans is $57,500.

sarchertech 5y ago
That’s the overall max, but the increasing yearly limits mean you can’t reach that unless you take more than 4 years. If you finish in 4 years, the max is about $45k

divbzero 5y ago

What about the alternative to ISAs proposed by OP? Better than an ISA is an income-dependent loan with some minimum amount that must be paid back regardless of the program outcome. With this setup: 1. You concede and comply with the existing regulation 2. You get access to the existing capital markets so financing costs come down 3. You can use credit reports as a way to enforce the contract so collection rates go up 4. Consumers already understand debt And, most importantly, the consumer gets a better deal than a classical loan. Similarly a bad idea relative to plain old federal loans?

twblalock 5y ago
Federal student loans already have income-based repayment options, along with forbearances and public-service loan forgiveness options. I don't see how this proposal is a better deal.
- ummonk 5y ago
  It’s basically a proposal to do the same thing for private loans. Unlike the federal government, the originator of a private loan will care about repayment rates, thus somewhat aligning incentives.

giansegato 5y ago

I'm not following. Afaik Lambda didn't collapse. It recently rebranded due to a trademark conflict, but they're still alive and well from what I gather. Someone be so kind to explain?

ilamont 5y ago
Lambda School leaked documents show poor performance over the last two years https://news.ycombinator.com/item?id=28989092 https://news.ycombinator.com/item?id=28989092 Lambda School agrees to end deceptive educational financing practices https://news.ycombinator.com/item?id=26946972 https://news.ycombinator.com/item?id=26946972
gonehome 5y ago
There's nothing to follow - most of the comments here are wrong. ISAs align incentives between teaching institutions and students, they're strictly better than the tuition model. They don't fix all issues because they still require selectivity on admissions (since the school needs to students to succeed in order to survive). ISAs are also not guaranteed to be good, but the ones originally used by Lambda School were good (Lambda School is somewhat of a third rail topic on HN, so it's worth just considering the terms). - Only require repayment if students gets a software job making >50k. - Payment was bounded to 10yr or 30k whatever happens first. Compare to college tuition which charges huge sums of money often paid for by non-defaultable loans and schools don't really care if students ever get employed by anyone. From his tweet thread conclusion: 1. Consumers are confused by ISAs 2. And when they take the deal, they often behave poorly 3. And when they behave poorly, you don't have great recourse 4. And there's a looming regulatory threat 5. And the financial markets aren't supportive My takeaway from this is that it's harder to build an incentive aligned business that really gets students to succeed than it is to take their money as tuition and not have to worry about that so much for business building. I guess I'd argue no shit - that's why ISAs are better, they force the companies to be good at getting positive student outcomes because it's an existential risk if they don't. That's kind of the entire point.
- michaelt 5y ago
  > ISAs align incentives between teaching institutions and students, they're strictly better than the tuition model. Well, there's two ways you could operate an ISA: 1. You invest $20k in each student, carefully selecting only the applicants who are most likely to succeed, and giving them the most impactful, high-ROI courses you can, so that they almost all repay at least $20k 2. You invest $500 in each student using prerecorded video classes and assignments graded by unpaid 'mentors', take on far more students, and every time you luck into a student who repays $30k that's pure profit, baby.

culi 5y ago

If anyone's interested, I'm a bootcamp grad with a current ISA. The ISA I currently have: *pros*: - zero interest - whatever hasn't been paid after 5 years, I don't owe - no payments are due if you don't have a job making over $50k *cons*: - tuition was definitely overpriced and you end up having to pay 150% of the principal loan (assuming you have a high enough paying job for long enough within those 5 years) - a lot of bureaucracy you have to go through to prove you don't have >$50k salary It definitely sounded scary when I first heard of them. And at the point I was in the bootcamp we were literally dumpster diving and shoplifting to get us through till rent was due and our foodstamps were renewed. Recently got hired with $90k salary so it worked out, but I was very aware of the fact that I was in no position to negotiate and could easily be taken advantage of EDIT: To clarify, zero interest means zero interest. The 150% is the terms of the ISA agreement. You pay 10% of your paychecks to them until it's either been 5 years or you've payed 150% of the principle amount. Most people that get jobs in tech will have paid the 150% before the 5 year mark

culi 5y ago
To be clear, this essentially means if I go through this program and end up working at McDonalds for 5 years, all I have to pay is through the labor of bureaucracy
- dwattttt 5y ago
  Only if the program doesn't teach you the meaning of the term "opportunity cost"
  - wutbrodo 5y ago
    The unqualified word "pay" is universally understood among English speaker not to include opportunity cost. When someone asks "how much did you pay for that big Mac", people answer "$3", not "$3 plus twenty minutes to walk there and five minutes in the store"
- imtringued 5y ago
  What if you go to a bootcamp, get saddled with an ISA and then work at mcdonalds and somehow get a better job that has nothing to do with the bootcamp? The bootcamp gets your money. Quantity over quality.

gruez 5y ago

>It's basically an extremely high interest loan, Yeah, because there's adverse selection going on: "But people with high credit scores tend to have better, cheaper options than ISAs". All the academically successful student can get student loans/scholarships to traditional 4 year programs, so you're left with people who are genuinely bad mixed with diamonds in the rough. Because of this, you have to charge more to make up for the bad application pool. I'm not sure why this is worth complaining about. It's like complaining that lawyers who work on contingency overcharge compared to ones that work by hourly. >A good compromise here would be to make private loans fully forgivable So basically turn them into unsecured loans with sky high interest rates?

eek2121 5y ago
Do you have any idea the issues that would solve? Warning: US centric post below. If you could file bankruptcy on private student loans, education costs would plummet overnight. Before you claim that education quality will go down, MOST of the money for both private and public colleges/universities ends up somewhere else beyond education. Football stadiums, expensive ad campaigns, fancy buildings, large marketing departments, even political lobbying. Kill off untouchable private loans and place restrictions on public loans then you will see money flow in the right direction. ISAs are foolish, regardless, because you don't need a degree to write code or manage infrastructure. My income was near $400,000 last year, and I not only didn't go to college, I dropped out of high school due to being homeless. In either W2 or contractual work, I've NEVER had a company question why I did not have a college degree. I understand some folks need the structure, and I think those folks need to be protected. For non engineering jobs or more structured jobs, ISAs are borderline criminal. For everyone else? Unless you like throwing away money that you don't have, stay away.

CPLX 5y ago

I learned from your comment that Lambda School fell apart a couple months ago. And I'm a pretty regular HN reader. Pretty interesting in the context of the founder being super active on social media. The denouement is always quieter I guess.

mathattack 5y ago
I think they just rebranded.
barry-cotter 5y ago
Rebranded (to avoid getting sued for using someone else’s trademark) https://www.bloomtech.com/ https://www.bloomtech.com/ > The online coding school that invests in you > Train remotely to become a software engineer or data scientist and pay nothing upfront until you are earning $50k or more

duped 5y ago

Federal student loans are a major driver behind increases in college tuition costs (1). Like you say, debt isn't necessarily bad - but there's a strong argument that subsidized debt and the lack of risk in granting loans just gives a bigger pool money for institutions to take from. Point being, federal loans are not a good deal. Each dollar you borrow effectively increases your tuition by 60 cents. (1) https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr733.pdf https://www.newyorkfed.org/medialibrary/media/research/staff...

mathattack 5y ago

Did Lambda fold or just rebrand?

imtringued 5y ago

I don't think the problem is that it is a loan. The real problem is that you can manipulate people to sign up for the ISA and then give a low cost bad quality service. If you scale this up high enough, there are going to be people whose income is going to increase above the threshold just through chance alone. If you provide some low quality MOOC that costs you very little per person then you basically get to take a share of someone's income without providing any value. If the institution was accredited and there were inspections and punishments to keep quality above a certain threshold the model might work but right now it basically invites companies to operate like scammers.

deleted 5y ago
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ransom1538 5y ago

"2. And when they take the deal, they often behave poorly 3. And when they behave poorly, you don't have great recourse" Yes. As it turns out when you invest in people with no skill, background or money - your investment goes to zero (excluding outliers). For companies like ycombinator the outliers are everything. But in this horrendous business model they can't capture the outliers' profits without being exploitative. If you honestly sat me down for 4 hours I couldn't think of a worse idea. Uber for cats? Rating people with a general global score? Selling loans to people out of rehab. I can't do it. First 15 minutes you learn in any loan business is: Income, Debt-to-income Ratio, Collateral. If those are out the window - you are either better than a trillion dollar loan system - or completely insane.

FastMonkey 5y ago

"Regulatory arb" makes it sound like they did some clever financial engineering to conjure money out of this air. It actually means they were able to skirt regulations meant to put a limit on the interest rates that borrowers pay.

lmm 5y ago
I think everyone in finance knows "regulatory arb" is the polite term for "we found a legal loophole".

throwawaygh 5y ago

The thread admits that savvy financial consumers have better options: > Second, credit scores were the most predictive variable of good participant behavior for us. But people with high credit scores tend to have better, cheaper options than ISAs. And then claims that the simplicity of the instrument makes them a better option than debt ("simplicity" isn't a virtue if the alternative is middle school pre-algebra levels of "complicated" and comes at much lower prices): > Furterhmore [sic], consumers were consistently confused by ISAs and had a vague sense they were exploitative. I think ISAs are less complicated than debt, but consumers don't have experience with then. His TL;DR has borderline misleading levels of... interpretation. The real story is that ISAs are exploitative and most consumers -- ESPECIALLY the ones who might actually do okay in life -- can't be "educated" out of seeing that an obvious raw deal is an obvious raw deal. So you're left exploiting the folks everyone else considers too risky, who, it turns out, are... too risky. Like... he says so himself, in so many words.

maxerickson 5y ago

The rebranded Lambda School still offers ISAs: https://www.bloomtech.com/tuition/income-share-agreements https://www.bloomtech.com/tuition/income-share-agreements So they didn't go away and Lambda didn't completely collapse. The outcome based loans aren't better, they don't have a payment cap and don't expire if you get a job offer above $50,000 a year. I wonder if they offer every graduate a teachin' position.

rayiner 5y ago

I think we’re between a rock and a hard place. We can’t tighten the student loan spigot. We have held out college as the route to upward mobility for everyone, especially Black people and immigrants, and the demographics of the people who will be excluded from tightening student loans will make it politically toxic. In view of that I see no alternatives to price controls. Any school that takes federal student loans can charge no more than $X,000 annually. I hate price controls but I don’t see the alternative in a market where government policies otherwise both goose demand and limit supply.

rwmj 5y ago
Price controls are being tried out in the UK and it doesn't work - every institution charges the maximum, so it's no longer a ceiling but simply the price everyone pays annually to go to university (£9,250 at the moment).

snicker7 5y ago

If it weren’t for private loans, it would have been impossible for me to go to college.

deepGem 5y ago

I never fully understood why students would go to a bottom tier law school and take out 200K in loans, when you very well know the value of a bottom tier law school. I mean, today is not the lack of information age. You can pretty much find out all the data points needed about a school. For instance, bottom tier schools typically don't advertise the graduating salaries or employment data. Just this one data point is an indicator of future earnings potential. That being said, top law schools or top schools for that matter are within reach for low income individuals as long as they clear the entry criteria.This entry criteria is a whole another debate but Lambda and other schools also have an entry criteria. There are need based scholarships and I think Stanford/MIT/Berkeley offer free tuition if your parents earn less than 100K per annum or something like that. So opportunity is definitely there but then not everyone can make it to Stanford, yes but that doesn't mean you saddle yourself with a huge debt by going to a lower tier school, knowing that your loan repayment capacity will be very low in the initial years of post graduation employment.

lmm 5y ago
> when you very well know the value of a bottom tier law school. I mean, today is not the lack of information age. You can pretty much find out all the data points needed about a school. For instance, bottom tier schools typically don't advertise the graduating salaries or employment data. Just this one data point is an indicator of future earnings potential. You're thinking about this from a very different set of life experiences. Not everyone knows to look for things like that. Not everyone even realises that there are different tiers of law schools. If no-one in your neighbourhood has ever met a lawyer socially, why would you?
- JCharante 5y ago
  But people do have an understanding that some schools are better than others. That's why Harvard has prestige and is well known even in those neighborhoods and some random school doesn't.
  - lmm 5y ago
    They might have an understanding that Harvard is something famous. They probably don't know that that translates into earning a whole lot more. I certainly didn't.

bau5 5y ago

> Lambda school, which fortunately also collapsed was notorious for this. This statement seems to be going unchallenged. It wouldn't surprise me, but if you check @BloomTech and @Austen on twitter, you can see they're still talking it up: https://twitter.com/BloomTech https://twitter.com/BloomTech https://twitter.com/Austen https://twitter.com/Austen

wodenokoto 5y ago

ISA, from a high level perspective, is a private, capitalistic institution, trying to prove that taxes makes both parties come out on top.