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No Tuition, but You Pay a Percentage of Your Income if You Find a Job (nytimes.com)
217 points by dhh2106 3 months ago | hide | past | web | favorite | 208 comments



Australia has a system that, while different, has similar perks to this. We have a government loan system called HELP (formerly HECS).

Basically students can get a zero interest government loan (rises with inflation), and only need to pay it off once they make above a certain threshold ($51,957 according to the official website[1]). The payments are deducted as a percentage of your income, with the payments increasing with your wage.

This has a number of benefits:

1. Students whose degrees don't work out for them (i.e. can't find meaningful employment) aren't stuck with rising interest on their debts.

2. Allows poorer students to go to uni without parental support (I am currently a student and support myself entirely)

3. Reduces pressure on graduates to find a job just to pay off their debts. They can take their time to find a good job in their industry, rather than working lower-paying, unrelated work to pay off their loans.

My degree at UNSW in Australia will cost about $27k AUD (~$19k USD) and I'm unsure about the costs of others in my country. Under the HELP system, Australians are allowed a fair go at an education, and can take their future into their own hands (rather than relying on their parents).

[1] https://www.studyassist.gov.au/paying-back-your-loan/loan-re...


Is it stepped at all? Do you owe nothing before 50k and then once you cross that threshold you now owe money? That would seem to incentivise staying below that threshold for a percentage of borrowers.

I also have difficulty seeing the first benefit you list as being a benefit. I don't have a problem with people pursuing degrees in fields that aren't big money makers, but I also don't know that the government should be in the business of incentivising people to study in these fields.

On the other hand, there is societal benefit to these fields being pursued in general. And the market economy may not adequately pay for the benefits it receives. As a society we wouldn't want everyone to major in poetry, though.


> I also have difficulty seeing the first benefit you list as being a benefit. I don't have a problem with people pursuing degrees in fields that aren't big money makers, but I also don't know that the government should be in the business of incentivising people to study in these fields.

It's actually one of the best things about the system. Maybe you want to be a social worker who will never earn much but will make a meaningful difference in peoples lives, or a lawyer that only works for non-profits, or a doctor that only works for doctors without borders, or any one of ten thousand other examples where a person can make an extremely valuable contribution to society, but doesn't earn a ton of money.

You made the mistake of assuming that only people earning a ton of money make valuable contributions to a society.


You make the mistake that the relationship between income and value to society is inverse. Delivery people, for example, or store clerks or the like are all not paid well, but their impact on society isn't particularly profound either. The loan payment structure gives people an incentive to have a lower paying job as opposed to a higher paying one, which isn't the right way to go about it.


Option #1: low-paid job. Probably routine job where you're not expected (or allowed!) to contribute anything that the last person who had the job could do. Live with roommates, rent your whole life, insecurity due to lack of savings, poor (if any) health insurance (US applicable).

Option #2: higher-paid job. Have to pay back loan, which might be a problem if you're just at the bottom of the "you have to pay it back" scale. May have your own apartment or possibly a house, savings, hopefully good health insurance, etc.

I've worked with people who would choose option #1 permanently. Their life was outside their work. They started thinking about the job when they clocked in and stopped when they clocked out. Most of them didn't go to college.

Others did go to college and graduated but didn't know what they wanted to do with their lives. Having the equivalent of a gap year or two (or ten!) after college without worrying about loan payments doesn't seem like the worst thing in the world.


> Is it stepped at all? Do you owe nothing before 50k and then once you cross that threshold you now owe money? That would seem to incentivise staying below that threshold for a percentage of borrowers.

You make no repayments below 50k but it when it kicks in starting at 50k it's something like 1.5% of income, with increments as you earn more. Combined with the fact that it's (1) real-interest free, (2) payments are collected by the Tax Office and automatically added on to your tax bill, and (3) Australia is really expensive, there's not much incentive to stay below 50k just to avoid paying it. Historically there have also been large discounts (10-20%) just for voluntarily paying it early too.


> I also don't know that the government should be in the business of incentivising people to study in these fields

That's interesting. So do you want government to only fund the vocational courses and allow the rich class to be the torch bearer in research, art, and culture because only they can afford it?


I'd think taxpayer money should be spent in ways that create measurable benefit to both the individual and the economy as a whole.

I'm not seeing the downside of only the rich being able to understand how Post-Impressionists like Suerat were different from Impressionists like Renoir.


> I'm not seeing the downside of only the rich being able to understand how Post-Impressionists like Suerat were different from Impressionists like Renoir.

You are picking the edge case here. Art and culture are much more then just rich class's pretense.

As far as wasting money is concerned, spending it just to create more replaceable cogs for capitalistic profit seeker is also a wasteful exercise. Why not ask the Industry to invest in producing those cogs and let government think the long term by focusing on things which cannot be measured in next quarter.

Why Government should subsidize the Industry?


> things which cannot be measured in next quarter.

I'm all for long-term investments, but can these ever be measured? If not, it will take more than your claims to convince me that it's worth investing in.

There are other ways to appreciate art and culture, such as visiting museums, reading books, watching documentaries or other youtube videos on these topics, etc. These are all free or much cheaper than a course in a college. You haven't demonstrated how an academic setting is better and worth the cost.

Govt doesn't need to subsidise industry. I'd be fine if these loans are issued by private investors, as with Lambda school.

> capitalistic profit seeker is also a wasteful exercise

No, their benefit can be measured in GDP. Imperfect, sure, but 100x better than your hand-waving claims. No personal offence intended.


>There are other ways to appreciate art and culture, such as visiting museums, reading books, watching documentaries or other youtube videos on these topics, etc. These are all free or much cheaper than a course in a college. You haven't demonstrated how an academic setting is better and worth the cost.

Academics is necessary to teach people how to create, understand and appreciate Art and Culture. People writing books (not necessarily, but most probably) have a degree in Language and Literature, people creating documentaries have a degree in Film-making etc. If you think these skills can be obtained from reading books, watching videos on YouTube etc, then the same thing can be said about STEM fields as well.


> Academics is necessary to teach people how to [...] understand and appreciate Art and Culture.

Any evidence in favor of that claim?

> If you think these skills can be obtained from reading books

I didn't say that nobody should study these fields; just that they needn't do so on taxpayer money.


Here is the OECD report http://www.oecd.org/education/ceri/arts.htm which stresses the importance of Arts in education and benefits of arts to students (even students of non-arts subjects). They also conclude that "The arts have been in existence since the earliest humans, are parts of all cultures, and are a major domain of human experience, just like science, technology, mathematics, and humanities. In that respect, they are important in their own rights for education."

Some Universities have Arts appreciation course for non-arts students who are interested in knowing, understanding and appreciating Art.

>just that they needn't do so on taxpayer money

May I know the rationale behind this? If I understand correctly, what you're trying to say is that letting people study these subjects on taxpayers money is a waste of public money, which I think is not true. There are people with Academic arts background who have contributed to the society. Even (for the sake of argument) if these are not economically rewarding areas of study, is it justified that the whole field of arts which has been there almost since the beginning of mankind to be not funded by the government just because the system under which we currently live doesn't find it profitable? Is it justified to deny access to an entire group of people who are interested to study Arts but they can't because they don't have the money to pursue it?.


Thanks for a reasonable disagreement, unlike the other respondent to my post.

I was saying that govt should perhaps not give subsidised loans to individuals (as in the Australian example) to study things like art because:

- the subsidised loan program needs to have a positive measurable ROI for it to continue. Otherwise, the next govt may bring it to an end, because there are hundreds of projects competing for government resources.

- in a world where poverty still exists, programs that are more bang for the buck may have the maximum positive impact on people. I live in India where millions are poor. Some amount of money should definitely be spent on arts / culture, but probably 100x more should be spent on pulling people out of poverty, and the way to do that is to identify high ROI investments in people.

- there are already other venues than Australian-type student loans for govts to subsidise arts / culture-type education, like university grants.

- I'm not sure about the ethics of giving a loan to a student for a course that may not pay back financially, but the loan will with the student for life, even if payment is delayed till his income increases. If arts are considered important to society, is it ethical to burden a student with the loan?

It was just a thought. I'm not adamant about it. I'm happy to see that we've had a good exchange of views, which is supposed to be the purpose of a forum like this.

Thanks for sending the link to the OECD report. I'll read it when I'm free to learn more about this topic.


> There are other ways to appreciate art and culture, such as visiting museums, reading books, watching documentaries or other youtube videos on these topics, et

And who becomes incharge of those museums? Who makes those documentaries and those books?


Someone not studying with taxpayer money.


So rich pretencious snob becomes incharge of the culture?


Since it doesn't seem like either of us is going to change the other's mind, let's move on from this debate.


You do realize all the art and culture that matters is not government funded, right? It doesn't come out of universities.


Probably a lot of culture that gets attention is counter culture but that's does not happen in vaccum. In order to create the counter culture, one needs to learn the culture first. It can happen outside universities as well but that does not discount the importance of art and culture education.


> Is it stepped at all? Do you owe nothing before 50k and then once you cross that threshold you now owe money? That would seem to incentivise staying below that threshold for a percentage of borrowers.

Once you earn over the threshold your HELP repayments apply to your entire income. So, yes, at low incomes you get a pretty significant tax increase when you cross the threshold. I think they should make it marginal like regular income tax is...

https://www.studyassist.gov.au/paying-back-your-loan/loan-re...


Technically you always owe the money, you just don't have to repay it when you have a low income. It is stepped in the rate of repayment -- it might be 2% of income at $50k and 8% at $100k. It certainly seems like your biggest raise ever when you pay it off.


>That would seem to incentivise staying below that threshold for a percentage of borrowers.

That only makes sense if its not implemented like taxes are. For example if when you exceed 50k and your repayment rate for the first 10k of income past 50k is 2%, and you earn 59k, you would take home $58,820. Why would you not want to take home this extra income.

Is of course is assuming it works like taxes in the US (which it probably does). The same kind of bad logic occurs in the US when people won't take a raise because they don't want to "jump tax brackets", but they don't realize you only pay the higher bracket rate on the income that was in that bracket!


Our taxes work the same way, but HECS repayments don't work the same way as tax. When you hit the threshold, you pay the percentage on your entire income, not just the income over the threshold. There are also multiple thresholds, so when you hit $57,730 you go from paying 2% of your total income to 4% of your total income. Personally, I've turned down overtime due to being just below one of the thresholds.

The repayment scheme is stupid.


The link I sourced [1] answers this better than I can. Please give it a read. Although in conjungtion I would note that hardly any university-educated students would wish to live below 50k AUD (~35K USD) forever. I'm not sure that avoiding such a relatively small payment each year would be worth stunting your earnings growth. It could be possible, but I don't see why anyone would shoot themselves in the foot like this.

I understand your problem with the first benefit I have listed. Here are a few things to consider though:

1. Should a student be penalised for not making the best degree choice (most doing so at the age of 18 or so)?

2. Even if the degree choice is perfect for them (in a potentially risky profession), should one not be allowed to give it a go?

3. In university you see many students who have graduated, started working, decided they hated their profession, and then subsequently returned to university to reskill. Rising debt interest would have prevented many of these students from taking the new risk of changing industries. The threshold allows people to re-enter education without being drowned by their payments for the duration fo their degrees.

I agree with you that the arts are an important part of society. However, I don't believe that, given the chance, absolutely everyone would pursue them fully. I believe those who do embark on the potentially risky career of the arts should be allowed and supported to do so, as well as being able to change career paths if they so need.

[1] https://www.studyassist.gov.au/paying-back-your-loan/loan-re...


How long can you be on HELP? For as long as you are a student? In my country, we have a similar system but you can only be on loan for _exactly_ as long as a medical doctor degree is which is 6 years. Say for instance you study an engineering degree (5 years), that leaves you with one more year that you can take a student loan which is rarely enough to reskill.


Up until recently, if you left the country, Australia had no real way to make you pay back the loan since they wouldn't track your income and would see no tax return. Last year new rules came into place to claim back income from people who had left without paying their loans, and will claim a % of your income (before tax, I believe) if your income is > $13,968 ... I ended up paying the whole loan in one sum so I didn't have to keep double reporting incomes, so I guess the system has worked.

> https://www.ato.gov.au/Individuals/Study-and-training-suppor...


The only % you pay, is on the money above the threshold amount. So if you earn 52k, you only pay the 8% of your student loan back on the 2k above the threshold.

So yes, it is stepped, and no, there is no incentive for staying below that threshold.

re: your second point, there is no 'incentive' to study in those fields, it is merely possible to do so. It is good, as fields that are low-earning like literature and art; are not reserved only to people in society who have parents with disposable income. It's an egalitarian policy, more in line with Australian cultural values than American.

re your third paragraph: indeed. The result of our system however is that the vast majority of students major in commerce & science; perhaps because the incentive of a lucrative career is enough to stop everyone pursuing arts.


HECS repayments are one of the only Australian taxes I can think of that actually isn’t progresssive and the percentage is applied to your whole income, not just that above the threshold. Which is why it’s also such a gradual tax, not even hitting 8% until a fair way past 100k.


The payments work the same way as tax brackets, so say 10% of your salary above 50k. Would you keep your salary lower to stay in a lower tax bracket?


Sadly they don't work like income tax. If you go into the next bracket, you owe the new rate on your entire income.


Please read the link provided [1]. The percentage is not high enough to purposefully keep your salary lower.

[1] https://www.studyassist.gov.au/paying-back-your-loan/loan-re...


I have to at least partially disagree with #1 being a benefit. Universities and loans for universities should not be encouraging students to waste many years of their life for a degree which does little to help them get meaningful employment. Additionally, with at least the american student loan system as I am more familiar with it, neither the university or the bank offering the loan faces any repurcussions for encouraging and financing these bad decisions, with the government guaranteeing the debt will be paid.


In regards to your first point, most US students when they go to college don't have the life experience to know which degrees will give them meaningful employment. A kid who was passionate about reading and was encouraged by their teachers and parents to follow their passions would, unsurprisingly, be likely to pursue a degree in English literature. After they've graduated the real world hits them like a sack of bricks and they can't find a way to earn a living.

At this point they've lost those 4 years of their life, end up with unreliable sources income (gig economy, part time work, borrow from family, etc), they're bogged down with crippling debt, and the world tells them it's their own fault. They even feel deep down that it is their fault, but now they're resentful and bitter because they're suffering despite that they had been working hard just doing what they were told to do all along.

With this proposed kind of loan forgiveness, the years are still lost to them but at least they're not crippled with debt as they try to get out of the hole they've found themselves in.

I also think a system like this incentivizes universities to help students make money and be productive after college. Under the current system, schools will shake down anybody for what money they can get. If tuition is based on future earnings, the university is going to try to get the student to make as much money as they possibly can.

In fact, this system would likely swing the pendulum so far the other direction that it might kill colleges of art and literature because they would suddenly be deemed unprofitable to the university.


Just to hit on your last point (that result oriented loans could kill "unprofitable" university programs) I'd add that universities existed for centuries when, relative to the entire population, practically nobody attended them.

This "businessification" of university education is an extremely new thing. I know you didn't intend it this way but that comment in a way hits me like when the music industry was trying to claim that piracy would kill music. We could pass a law that any and all music could be copied indefinitely and for free which would indeed kill the music as a mass industry, but music would undoubtedly continue to thrive. We just wouldn't have so many Justin Biebers or Britney Spears. Darn.

And so too for education. Get rid of systems which motivate profit driven education (which is no longer an issue just at universities which are overtly for profit), and you don't destroy education - you destroy the artificial facade masquerading as education.


That's an interesting thought. Amusingly I just assumed I'd still pay for Spotify in that case, since they save me the time of maintaining and carrying my library around. Similarly, I'm pretty sure that industries may shift or change fundamentally, but we're far better off with these changes ultimately.


Indeed. Arts degrees have suffered large funding cuts in Australia in recent years. Perhaps for the reasons you describe.


In the Australian case neither the university or a bank is financing the loan. It's all the government. Most of the universities are public as well so there's less incentive for profit, although it does still exist.

Most people will probably earn over the minimum HELP repayment barrier over their lifetime and if they don't then I don't think they should be saddled with debt.


Biggest advantage by far: no extra paperwork.

As a student you give your tax number to the university, and then the loan repayments are handled by the tax system when you do your regular annual tax return.


Germany has something like this as well (it's called BAFOEG). It's not for tution (because there isn't any) but for your cost of living during study. It carries zero interest, you only have to pay back half of it and the pay back is capped to 10k total.


It should be mentioned that a) your parent's income (or yours if you are over 25) needs to be low enough for you to qualify b) it requires you to finish within the expected timeframe (possibly also have certain grades? Not sure about that as I didn't qualify) and c) it's not just for university but also for vocational training.


Wouldn't you delay a raise or try to remain below 51 until you can make over 71 to avoid getting paid less?

The system looks good on paper. It reminds me of a type of public housing offered that allows you to give 30% of gross wages. Many people stop working completely and get welfare/assistance (to qualify you need to be working or getting a regular cheque) or delay raises, etc because the less you make the less you pay. The more you make the more taxes you pay so it creates a situation where the harder you work the less you make unless you can get a huge pay increase and leave. It creates a trap.. there is a huge fear of leaving because you will never get back in.

I like the free if you qualify German model but even that has problems.


I addressed this in another comment more fully. For this version though, consider that even though it might be possible to do such a thing, the vast majority does not. You could potentially be sneaky about this, but the effort would not be worth the small savings you would make.

The current HELP/HECS system doesn't just work on paper. It's been used successfully for a while.

Remember, we are about repayments starting at 2% at 50k AUD (35K USD) and going up to 8% at $107+ AUD (77k USD). This is not a crazy, crippling payment. It is not worth making substantially less in your job in order to save such (relatively) small sums.

Australia is not a welfare state. We rank 5th in economic freedom [1] (USA is at 18). While the nation does have many problems, I do believe that Australia performs decently at balancing a free market and government support. While we used to have completely free universities, I believe that the current loan program is a decent midpoint between the US and European systems.

[1] https://www.heritage.org/index/


Economic freedom rank is a bit confusing. Comparing Canada to US the tax burden is listed at 65 for the US and 76 for Canada. Comparing income taxes, capital gains, local/provincial/state the US is much lower.


It’s fairly comparable at around 200k USD (converted to equivalent CAD). Total tax in SF isn’t all that much lower in the US.


We also have the same system here in South Africa. It is called NSFAS(National Student Financial Aid System). It is government loan. If you pass all modules you registered, the whole loan used to be converted into a bursary as an incentive. Starting from 2018, education is now free for people who earn below a threshold of R350,000(~USD25,000) household income.

There is also a contingency plan for students who come from families with a household income of R600,000(USD 43,000) per annum.


The key thing missing from this is the incentive for the education provider to provide courses that have real world demand, they get paid either way by the government and it's the rest of society that has to pay for that underwater basket weaving course.


Not an issue in practice. Most students choose degrees that have real world demand.


The difference being that you step out of university with an internationally recognized and respected accredited diploma that will qualify you for other employment down the line. These programs are scams.


> ~$19k USD

Was this with room and board? FWIW, there are many college degrees in the USA that are in the $7k/yr range, and many of then were around $20k total prior to the last round of state-level austerity in the USA.

Getting a US college degree for under $20k is still very possible if you a) commute and b) do the first two years at a community college (typically closer to $2k/yr, or $18k-$21k for 2 years cc + 2 years state college).

With a bit more public subsidy (or differently targeted subsidy), many US colleges could be well within the $20k USD range for commuting students. And some courses of study already are.


Australians tend to stay in the same city for college, so room and board are generally not required. Most students live at home with their parents. All students have access to government assistance in the form of centrelink [1] (though centrelink is a beauracratic pain to get through), and out-of state students are entitled to more.

In terms cost, UNSW is one of the top universities in the country. (EDIT: this is an ambiguous sentence, I am sorry. I mean that UNSW is one of the top universities, and cost is still lower than many US universities) I understand that US college can be done on the cheap, but it's definitely not the norm. You can always find work arounds I'm sure, but I was just emphaising that going to a top uni for this price sans-hassle is very much the norm here.

On top of this, it's important to note that even minimum wage jobs here pay pretty well (the highest by buying power in the world [2]). Thus, even if you are doing university and working part time you can do ok.

[1] https://www.humanservices.gov.au/individuals/subjects/paymen... [2] https://money.cnn.com/interactive/economy/top-10-national-mi...


> In terms of cost, UNSW is one of the top universities in the country.

This is certainly the major difference.


For undergraduate studies, the federal government also subsidises classes at standardised rates depending on subject.

So no matter which university you go to you'll be paying the same "Commonwealth supported place" rate for your field of study. For engineering it's $9185/yr for what's usually a 4-year degree. [0]

Postgraduate study is strange because some universities charge full-fee, some offer commonwealth supported places for certain degrees, and some offer CSP as scholarships. My masters degree at UNSW for example was commonwealth supported so I only ended up adding $8k onto my loan for it.

[0] https://www.studyassist.gov.au/help-loans-commonwealth-suppo...


Living in a dorm is not very common in Australia - atleast this was my experience in Sydney. I did not have many friends who lived on campus. Most students commute from home, and among my circle of friends most of us lived with our families.


Agreed. Although as someone who has studied in both the US and Aus (did an exchange semester at Georgia tech), I'd say that living on campus does have some benefits, socially and academically.


Fiji has this too. The Tertiary Education Loan Scheme (TELS).


How is this different from income-based repayment of federal student loans? While there are different programs, the general idea is that you pay 10% of your "discretionary" income for 20 years with the guarantee that your payments aren't higher than the 10-year payoff rate.

The article doesn't really have information on the Purdue system other than saying that it might cost high-earning students 250% of the price of their education. Of course, a 30-year loan at 6% will have the borrower repaying 216% of the original amount and around $24k/year so it would only cross 10% for people earning a quarter million a year (and it doesn't generally seem bad for people earning a quarter million to pay more back).

The big issue is for universities is how they would handle marriage. For federal IBR, I believe you have to file your taxes separately. That isn't a big issue in 2018 due to the Tax Cuts and Jobs Act of 2017 which meant that the tax brackets for "married filing separately" are the same as "single" up to $300,000 in individual income. However, in 2017 "married filing separately" had higher taxes starting at $76k.

The federal government has a big hole in their IBR calculations in that it doesn't consider the fact that spousal income can change what another spouse might earn. But it's the federal government and they can afford to lose a bunch of money.

How would a private university with a much more limited budget handle this? Would they be happy with someone deciding to leave the job market because they married a high-earning spouse? Would they require payments based on household income?

Likewise, the article really doesn't answer how a university is going to do this. With the Lambda school, it's easy: VC. Lambda has quite low costs (their programs aren't 4 years), they only teach high-earning fields, and they have a 2-year payoff window. It's easy for them to say that their students average $70k/year and 17% of that for two years is $23,800. Likewise, the two-year payoff period means that things like marriage and leaving the job market aren't as likely.

While universities have a bunch of money, can they essentially float tuition for a decade or two? Probably not. If they could, they could have just offered loans themselves rather than having the federal government lend to students.

Plus, while the cost of university is terrible, most students don't graduate with a mountain of debt - more like a hill of debt. $22,000 is a lot of money, but a middle-income job can tackle $22,000 in debt. That's well below the cost of the average car sold in the US. More importantly, 10% of your income would likely be quite a bit more than the regular payments on a $22,000 loan. Are universities just going to use income sharing agreements to replace grants? Will students be graduating with $22,000 in loans plus an income sharing agreement to cover what the university scholarships/grants?

Generally speaking, universities in the US price themselves as, "how much can you afford to pay?" If you are receiving need-based aid and get a merit scholarship, usually your price goes up because that merit scholarship means you can afford to pay more. Is the income sharing agreement going to mean that students can afford to pay more? "I know that you can't afford more than $X today, but this agreement ensures that you pay $X and then Y% of your income after graduation." Is that the future?

One of the things that makes education financing so difficult is that steps taken to reduce student hardship can simply increase prices. If you give every university student a $10,000/year grant, every university knows that they can raise their prices by $10,000/year. The students (and families) were paying the price before given their means. If the government gives them an extra $10,000, the university knows they can ask for it with little to no options for the student. Universities can capture most or all of programs designed to help students afford them (rather than helping the students).


Because when the loan is forgiven after 20 years it looks like income. So you have to pay tax on your forgiven loan. If Lambda School can’t teach you well enough that you get and keep a good paying job then they take the loss not the tax payer.

Also: advocating for keeping the old system by saying this new way is not different is the least Hacker News things I’ve ever heard. The student loan crisis is an existential crisis for America. More schools should adopt the Lambda School approach, America would be much better off.

The current model is no different to unscrupulous bankers selling loans to Wall Street or Fannie Mae: they just lure students to the school helping them fill out student aid and loans and then give them subpar educations with curriculum being taught like it has been for years but they don’t care to change or innovate because the school has already been paid by an entity — the US education department who has deep pockets.


It doesn't just _look_ like income. It is income. If I give you $100 as a loan then change my mind and say 'you can have it', you just made $100.


What if we turn it into something a little more analogous, and I loan you $100, and you use that $100, and I never asked for it back, but 12 years later go "actually you know what, never mind about paying me back", that's not $100 you now have. That's $100 you had 12 years ago. But we also need to make sure to keep the analogy in the same ball park, not the same county, so when we're talking $100, the tax on that isn't going to bankrupt you and it's a bad analogy. Let's up that by a factor of 500 instead: when we're talking a full student loan, if I say "actually, keep it", I literally just bankrupted you for kicks, and you should have had some kind of legal protection that prevented me from ruining your life on a whim.


That can't be right. You're saying that going from $50k in debt to a student loan lender to $12k or so in debt to the IRS is a bad thing? Why do you care so much about who owns your debt that cutting it by 3/4 is a loss? Not only that, but now your debt can be eliminated in bankruptcy (a unique feature of student loans is that they are immune to bankruptcy). This looks like an altogether enormous win.


And how long, exactly, does the IRS allow you to pay off that $12k? Because if it's "a few months", and really even just "a year", you're proper fucked. Not everyone gets a nice $60k/yr job after their $50k loan investment, and having a $50k loan over 15+ years is manageable, whereas $12k in one will ruin you.


6 years is standard, plus the time between the forgiveness event and filing, which gives you another 3-15 months or so. Down to 3 years if your balance is <$10k.

And as I mentioned before, if it was too short you could declare bankruptcy, which is an option you don't have with student loans. My point that even in the worst case you're in a better position than before still looks valid.


I don’t care about who owns it. But paying income taxes on 50k of forgiven debt would be hard for me.


Sure, it might be hard. But my point is that it can't be harder than paying the debt itself. Debt forgiveness does not leave you in a worse position unless your marginal tax rate is more than 100%, which is vanishingly rare.


What? If I make 80k a year having the IRS think I made an extra 50k puts me in a new tax bracket


The difference in your tax bill between $80k of income and $130k of income is $15k. This is much, much less than $50k. In this case the loan forgiveness has increased your net worth by $35k. That's a lot of free money that you're insisting is actually a curse.


But it's only a new marginal rate, so it still only applies to those extra 50k


The average American doesn’t have the savings to pay that extra amount is what I’m getting at. And I’m average.


Why would you have to pay it all immediately? The IRS is very helpful with payment plans (this is obviously better for them than demanding full payment and then watching you wipe away the debt in bankruptcy). Here are some details [1] - fees to move your owed taxes to a long-term payment plan (essentially a loan) range from $31 to $225.

And if they aren't, personal loans are possible. Or even bankruptcy! The common thread between these options is that they're better than being $50k in non-dischargeable debt.

[1] https://www.irs.gov/payments/payment-plans-installment-agree...


No I wouldn’t want to owe the entire amount of the loan but if I can’t pay off the loan or the forgiven amount I’m screwed either way. Just in the latter situation I’m relatively less screwed.


You appear to be pretty attached to the idea that IRS liabilities are worse somehow than student loan liabilities. Other people seem to be trying in good faith to understand why you think this.

IRS liabilities can easily be repaid over long time scales, usually at much lower interest rates than you can get on unsecured loans such as a student loan.

A $50k non-dischargeable loan, at a relatively high interest rate, with a flexible repayment timeline does not appear, to me, to compare favorably with a $15k IRS liability, dischargeable in bankruptcy, at relatively low interest rates with a similarly flexible repayment timeline.


Back to the point: Lambda school and schools like it are the for profit schools we needed. And I hope the model scales to other industries and that education is flipped on its head because of it.


Would you rather owe the entire amount of the loan?


>they just lure students to the school helping them fill out student aid and loans and then give them subpar educations with curriculum being taught like it has been for years but they don’t care to change or innovate because the school has already been paid by an entity — the US education department who has deep pockets.

Total tuition loans outstanding is around $1.5T. Total US Education Dept annual budget, 70B. Median length to pay off student loans is around 20 years. 30% of people graduate with no debt, and of the remaining, median debt is around $30k, the cost of a decent car, and a fraction of what the same people will pay for a house.

Adding the entire Ed budget for the past 20 years is no where near the amount of loans outstanding. And in fact they lend only a fraction of their budget to student tuition.

Thus your claim that the US Ed dept is paying at the end of the day is mathematically impossible. The debt is from private lenders, who do have incentive to ensure borrowers pay back.


> The debt is from private lenders, who do have incentive to ensure borrowers pay back.

Not necessarily. Private banks issuing federally-backed student loans want you to default, because then they double their money. See here: http://www.collegescholarships.org/research/student-loans/


Your link doesn’t show how a defaulted loan is more valuable to a private bank than a performing loan. It would be more accurate to say private banks are relatively indifferent to the performance of a loan. (They’re actually marginally incentivised to collect performing loans, since that is a cross-selling opportunity.)


> Private banks issuing federally-backed student loans

Don't exist. They used to, before 2010, though (the propagadagraphic you link obliquely alludes to that with it's reference to the “Obama changes” that it does not explain, perhaps because they render the flowchart entirely irrelevant.)


Loans are a mix of subsidized and unsubsidized, sure. But the issue is that the incentive is that of any loan owner: repayment of the loan. With Lambda School the incentive is making better, more employable, engineers and the loans will pay themselves off. What good does it do the person and the economy if a bunch of people are straddled with debt for 30 years for a degree they can’t use being hounded by creditors while the universities remain the same? In the end there’s a network of entities that all own debt that will never get paid back, debt that is for all intents and purposes subprime. Remind you of anything?


The DOE budget doesn’t include disbursed student loans. These days, the DOe disburses over $120 billion in loans per year. Almost all student debt ($1.33 trillion of $1.5 trillion) is Federal government issued.


Do you have a source? Every one I find states the numbers I posted above, no where near your number. Total federal and non federal combined is currently around $100B annual.


I guess my number is a bit dated. It's $95 billion in federal loans in the most recent year, but it peaked at $117 billion in 2010-2011. https://trends.collegeboard.org/sites/default/files/2017-tre... page 9. Still, the DOE budget cannot reflect that since it is much less.

Non-federal loans account for 11% of loans: https://trends.collegeboard.org/student-aid/figures-tables/t....


In a word: incentives.

It’s not about the payment structure alone, it’s about a school that is incentivized to make its students successful. IBR is just taxpayers swallowing the bill when schools fail.


Yes, it's simple: Lambda School has skin in the game. Traditional universities have no skin in the game. Hence why we have a rent-seeking university system that hoovers money away from hard-working parents (and students), while putting those same parents and students at financial risk.


But then such schools that predominantly work on ISAs, will pre-select for good students, who are most likely to succeed and also for industries where the compensation is higher. Remainder (which is arguably 90%+) of the students will still be at the mercy of other schools + taxpayer.

It seems, this just provides one more payment option to students who are likely to succeed anyway and a refreshing business model for schools that move early into the space.

It doesn't address the real problem with schools i.e. making the 20th%le student successful and not a taxpayer burden.


> But then such schools that predominantly work on ISAs, will pre-select for good students, who are most likely to succeed and also for industries where the compensation is higher.

That still sounds far better than the current system of selecting for the most popular (instead of valuable) subjects that draw in the most clueless students to get indebted for life for something they are unlikely to succeed in anyway.

> It doesn't address the real problem...

What does?


Exactly. With a federally garanteed loan no less! The school has incentive to take you and cater to your fanciful wim major, its free money to them up front and your problem (repayment) later.


> But then such schools that predominantly work on ISAs, will pre-select for good students, who are most likely to succeed and also for industries where the compensation is higher.

That actually sounds like a good incentive structure to me. Most people shouldn't study something that will not give them some advantage (which these schools would select for).

If you struggle to make ends meet it wouldn't be a reasonable decision to study something unprofitable in the first place. I wish it was different and everybody could invest an infinite amount of time to learn what they are interested in, but in a resource constrained reality that's not possible and individuals have to make decisions that are advantageous for them.


By definition and practicality, schools and fields of work will remain a pyramid i.e. at any given time, there will only be a few fields and colleges that "give advantage", being able to absorb only a fraction of students by competition. e.g. field of programming can only absorb a million odd engineers in next few years. (Ironically, when it absorbs more, it will no longer remain a field with high wages).

The remainder of the iceberg hence, will need to go to other lower parts of the pyramid. ISAs won't do anything for that. Only the government will. And the Govt does it for us, with our money, because not providing education to lower levels of pyramid will result in nothing but societal anarchy.

ISAs hence shouldn't be hailed as panacea for education loans which is what marketing makes us believe. The only advantage of ISAs, is that they unlock better education for some "motivated students" (for lack of an accurate phrase) from underprivileged circumstances. That's not a trivial advantage for those who qualify. I don't know what that % of population is, but it can't be much.

In any case, however small, that number sure seems enough to build a business around it with some feel-good marketing (like this article).


Be aware of IBR and the promise of loan forgiveness. These are relatively new programs and the first batch of people taking advantage are actually people who work in public service/non profit (whose loans get...or are supposed to get forgiven after 10 years).

There are significant numbers showing the loan servicers engaged in fraud to prevent the forgiveness. One of the major loopholes is on an annual basis when income documents are due, the loan servicers would take extended periods to “review” the income docs and place the loans in forbearance for a month. Then when forgiveness time came they were denied for not having made payments (through no fault of their own) for 120 consecutive months essentially resetting the clock every year.

Not to mention at any given point these programs can be axed, which I’m sure they will be if there were ever a significant portion of the population who would actually qualify for the forgiveness.


Lambda School's ISA is forgiven at 5 years if you don't get a job that pays $50k+ in the field you studied.

So you very possibly could pay Lambda School $0.


> The article doesn't really have information on the Purdue system other than saying that it might cost high-earning students 250% of the price of their education.

tl;dr; on that is you borrow a certain amount (that you choose, but is capped by the program). In exchange, you pledge a certain percentage of your income every month for a certain number of months (5-10 years generally) [0]. The maximum amount you'll repay is capped at 2.5x the loan amount (i.e. if you borrow $10k, you'll repay a max of $25k).

Practically speaking, the gist of the program is that it's good for students with middle income career outlooks, but terrible for students with high income career outlooks (i.e. talented CS majors) since you'll end up paying more than a traditional loan.

[0]: The percentage pledged varies by the loaned amount and major. The number of months seemingly only varies by major. You can play with the calculator here: https://compare.vemo.com/

Purdue's program: https://www.purdue.edu/backaboiler/index.php


they may have this out...Indiana public colleges have a with HS graduation take an advance test out that gives up to 2 years college free to those HS students from Indiana..so some are looking not at 4 years at almost $50k but $25k


> The big issue is for universities is how they would handle marriage.

I don't see why this is an issue at all. If the college claims that "finding the high-income person you will marry" is one of the reasons to attend that college, then they should please return to the 1950s (or earlier!). If they DON'T, then the repayment should be based on the individual's income, regardless of their spouse's income.

Does this mean that a college risks getting paid very little by a graduate who ends up becoming a stay-at-home spouse? Sure, but that's part of the risk. A 4-year college wishing to introduce such a program can always take a less-than-complete approach and still charge some minimal tuition up front (presumably in exchange for a smaller slice of "lifetime" earnings).


Except this leads to an incentive for sexist bias in admission since women still dominate the "stay at home spouse" category. Finally, especially for undergrad, many DO go there for general education/becoming more worldly, even if they have no intention of joining the workforce.

When a couple marries, I think they should realize that they are to face the world together, and this means repayment of educational expenses of both partners.


I've heard professors argue that college as a physical location is only useful for meeting people, and the learning itself was not even relevant. I don't think this is a 1950s outlook.


If I understand correctly, at least at elite universities, that's about meeting contacts, not so much about meeting spouses.


Meeting people is useful for education & learning.


That's a pretty easy system to game. Got loans you can't afford to repay? Quit your job and claim to be unemployed, so you can stop paying your loans and live off your spouse's income.

A lot of people who can't pay their loans are in low-paying jobs they don't like, so this would be a very tempting option indeed.


Financially, it would be throwing away a dollar to try to save a couple of dimes. There is no scenario where you would be better off by doing so.

But if the low-paying job is crummy enough, maybe you don't care about strict financial calculations...


You know, it's funny, there's a lot of comments saying something along the lines of "college isn't just to get a job".

Which is really funny, since that's absolutely the primary reason why college educations are pushed. E.g. "if you don't go to college you'll end up working at McDonald's"

Plus, I have yet to see the evidence that colleges provide this virtuous yet intangible quality of non-economically beneficial "wholesome" education.


I have never found the argument that "college isn't about getting a job" convincing. Yes, it's important to be well rounded and expand your horizons and all the other platitudes that people say. But I'm not paying tuition to be "well rounded", I'm going to college as an investment in my own human capital. I can read an interesting book in the evening to be "well rounded".


Some people confuse being well-rounded with having other people tell you their ideas and then being able to repeat and maybe even riff on them.


Perhaps some people are paying tuition to such intangible benefits, just you (and I) aren't. Many people in such situations likely repudiate the whole concept of "human capital" (and maybe with good reason).


That does seem like buying a car factory because you like the new car smell, in a way. Maybe it's the bias of my own experiences, but I can't imagine what rational person faced with the realities of the world would spend tens of thousands of dollars (and $1 million+ over thier lifetime potentially) and years of thier lives in pursuit of what is essientially a curiosity or hobby (unless they are already very well off).

If one does have such an intense interest in some topic, getting a "real degree" at college would offer them a lifetime of spare money and time to pursue it. You can't do much painting working 80 hours at McDonald's only to not be able to afford paint. It just doesn't make sense to me.


> Plus, I have yet to see the evidence that colleges provide this virtuous yet intangible quality of non-economically beneficial "wholesome" education.

The biggest performance dilemma I noticed upon entering college is basic literacy. I saw most people reading at a 9th grade level, which is average for most Americans, and struggle to write a 2 page paper. That 2 page paper was hardly competent once written.

The problem was so pronounced that in order to be awarded graduation of a bachelor's degree you had to take and pass a writing competency test at any time during your undergraduate education.

In the real world, as a software developer, the biggest barrier I see to the success of many developers is basic literacy. I see so many people who cannot communicate at a professional level. They struggle to reason about the problems they encounter and struggle further to put their thoughts into words that a make sense to an outside party.

Most developers I have ever worked with spend their entire careers struggling with a variety of concerns that ultimately (when you remove the bullshit and excuses) boil down to struggles of basic code literacy. I suspect we have all encountered this when everything is an argument of code style, spaces vs tabs, OOP vs functional, and so forth. Code literacy is the difference between thinking in terms of algebra (instructions) versus thinking in terms of calculus (process). When you are literate you form visions of what you want and simply build the vision accordingly.

As somebody who rewrote their personal application from scratch last year (about 40,000 lines of code with minimal boilerplate) while also working for two separate employers and having a spouse and kids I really don't have patience for people who fill their time with literacy bullshit. As somebody currently deployed with the time military to a conflict zone this is the thing I dread most about returning to the corporate world.

Holy shit people. Pick up a damn book and read. How you communicate will influence how you write code.


>Holy shit people. Pick up a damn book and read. How you communicate will influence how you write code.

This is a problem when most information consumed are now either in Video ( TV / YouTube, etc ), Pictures ( IG with short or no description ), and Short form of writing ( Blog Post / Internet Comments ), even worst is when most of these are for Entertainment. And there is a trend of basic literacy falling even those coming out of College ( Or Universities ).

Not quite sure how we could fix this. People aren't reading books any more. Steve Jobs once said we need Editorial more so than ever, and not fallen into a nations of bloggers, and that was nearly 9 years ago.


My 9 year old son comments on spelling mistakes in the in-game text or captions on Minecraft videos by adult vloggers. My 9 year old son is Dutch and he recently started to comment on English spelling mistakes.

Sadly he also learns new words on youtube and in games, and sometimes I need to correct his spelling and he doesn't believe me.


> Plus, I have yet to see the evidence that colleges provide this virtuous yet intangible quality of non-economically beneficial "wholesome" education.

1) what evidence would convince you?

2) when you consider that education is a social policy, and is designed with the purpose of delivering benefit at scale, does that change your opinion? (That is, when you consider that it's meant to shift the median student's outcome more than that of the p99 student)


College is education, not training. Crucial aspects of working in the real world are learned on the job, things that how to operate in an office environment, how to collaborate, how to write, present and justify your ideas and render them into applied things. These are not things taught in university.


Don't get me started

College education is hugely overrated, and especially by using bad reasons like that

Spare me the hyperboles, using the "well rounded" adjective makes no sense except for objects that are supposed to be round.

College is essential if you are in a regulated profession and/or is it too expensive (or impossible) to learn it yourself (like medicine, other engineerings, law, etc)

For other areas? Not so much


I'm curious about what you consider 'other areas' to be, and about how competent you think you are at them.


> Plus, I have yet to see the evidence that colleges provide this virtuous yet intangible quality of non-economically beneficial "wholesome" education.

You could try checking course requirements. Every college I'm aware of requires that students take classes in a variety of subjects outside their major before they can graduate.


Which doesn't provide the evidence the parent was looking for. Just because you take a variety of classes doesn't mean that they have a benefit. If they do, please give us the evidence.


The parent asked about the

> virtuous yet intangible quality of non-economically beneficial "wholesome" education

How could I possibly provide evidence of an intangible benefit? All I can do is show that they provide the education that's supposed to have this quality.


Not sure if it’s anyones job to search for evidence for you or the parent.


It is, if you have any interest in convincing him otherwise, and successfully holding a conversation. If your goal is to argue aimlessly, and simply make your anti-claim with no new information (thereby convincing no one), then yes, you have no further tasks to be executed. But then you might as well have not spoken in the first place.

Otherwise, all you’re claiming afaict is that the posters should argue with themselves — find the counter-evidence to their own claims, which is likely sufficiently convincing that they would not have had any reason to speak in the first place.

That is, this idea of “not anyone’s job to search for (counter)evidence” is antagonistic to any form of discussion where parties disagree. If you want to make the opposing claim successfully, its quite useful to have evidence to support it (it’s not their job to find it for you... its not anyone’s job to do anything in an HN thread.)


The "citation needed" type of response is also antagonistic in what is a discussion site rather than an academic paper.


Sort of; if the other party is making clear what evidence he’s looking for to disprove his thinking, I think its fair — especially when his ideas run counter to the norm (which naturally people put a lot of belief in, with nothing to support it, because everyone else believes in it). Ofc, if he just counters everything with citation needed, its pointless.

But in this case, evidence was requested for a particular idea, and the response was completely tangential to the request. And it wasn’t really an issue of citation needed, I think, so much as just anything to support the idea that colleges actually offer non-job value (and that they offer courses across multiple fields is insufficient, which is true, its a thing they’re doing but says nothing about effectiveness).

Ofc, the difference is in the intent. And the problem I have with “its not my job” is the intent; it’s a belief/defense whose primary purpose/outcome is to kill communication, and I very much like communicating


I see where you're coming from, but it's good to impose the burden of proof on the person making the claim. If the person making the claim can't be bothered to dig up any supporting information, neither can others. It keeps the quality of discussion higher than otherwise.

One one or two occasions, when I was about to post something, I looked for evidence, and realised I was mistaken, and didn't mislead others.


You're making pretty strong claims but haven't supported a single one of them.


Hey, co-founder of Lambda School here.

Yes, some countries have similar structures, where you pay after a certain threshold. The difference is:

1. In those structures the school gets paid no matter what, the taxpayer just swallows the cost. With Lambda School we will literally go out of business if a large percentage of our students don't get jobs. That causes a lot of stuff. For example, we have an entire sales team dedicated to bringing companies in to hire students, and there are 2-3 that come in every day to hire students.

2. Our minimum is much higher than government minimums ($50k in the US).

3. We only collect a percentage of income if you're hired in field (using the skills you learned)

4. If you don't get a job within 5 years the agreement simply goes away and you owe nothing.Happy to answer any questions, though I'll be in and out.


It might be cynical but it seems you are moving from a bad system to another bad one.

In the current system, students are the customers, in your new systems, students are the products.

How will you ensure that your private interest are aligned with individuals, and society needs ? You are currently avoiding that issue by targeting high demand/high paying jobs but on a larger scale those issue will arise


How are students the products now? We only get paid when they are successful, that doesn’t mean they’re not the customer.

The service we provide is helping them into a good job, so of course hiring companies are stakeholders, but companies are the customers.


The university has an incentive to value your early salary _above all else_. This may be dangerous (hence my question). The article clearly shows some potential issues by pointing to several very useful but not very well paid profession (eg: nurses) who will have trouble finding lessons in this model.

Closer to our trade you might see stuff like :

- We don't offer design lessons because backend developers earn more than designers, so go study Rust, it's so hot right now !

- Marketing ? Heck no, salaries are only soaring later in your career, we can't get break even with that

- Your idea of a quantum computing course seems interesting but we don't believe there is a big enough market for people in that field at the moment, it's more of a research subject right now (weather that's true or false is up to the reader to decide).

- ...

Since the university is exclusively paid by your future salary, every second that you spend in class must be immediately translated in extra $$$ in you first compensation package. If your goal is to make as much money as soon as you get out of school, your incentive are aligned. Otherwise they are not, and that can be dangerous. Steve Jobs is a notorious example of someone who took some lessons that did not seem really useful not so high profile at the time, and only later proved to be critical in his success.

At a much smaller scale, 7 years after graduating, I am rediscovering some skill/knowledge I acquired at uni that did not seem to matter a lot when I started working (and that definitely were not taken into account in my first job interviews). I believe they makes me a better/more productive engineer. I fear that under that new system I might have never learned them in favour of something hotter and more marketable.


It's not dangerous, not nearly to the extent you're making it out to be.


How does changing the paying method change the roles in the transaction? At worst (eg financing a car or house) it adds a new role, but customer remains the same.

If there's an issue, it seems to me it's the fact that students shouldn't be treatef like customers, specially by the State.

How will you ensure that your private interest are aligned with individuals, and society needs

How is the current system achieving that?


Won't you be incentivized to prefer quantity over quality?

You can easily scale the number of classrooms by 2x but it isn't as easy to 2x the starting salary of your graduates.

The worry here is that you will over-focus on how to market/brand yourself to capture the salary of as many people transitioning to tech as possible, rather than helping individuals maximize their potential.


Congrats on the funding!

I think that this is a viable model for professions where high paying jobs are available aplenty. How are you planning to scale with this narrow model? Also what is your competitive advantage? I am trying to figure out the valuation as an investor.


Valuation is in the NYT article :)

The model scales very well. We move people from low(er) income to high(er) income. That’s how it should be, and there’s a whole lot of that to be done.


Hey, your startup is really good and I'm pretty sure it will be a hit. I have been thinking to implement such a system myself and I have done plenty of basic research on this topic. The idea comes at the right time.


Good. This does exactly what Nasim Taleb argues and forces the college to have "skin in the game." Education needs this sort of revamp badly. Government meddling with student loan guarantees caused the price inflation, more government meddling won't solve the problem. The system needs a reboot, and this sounds like exactly what it needs. Don't pay unless you make over 50k, awesome. Payback lasts 2-3 years, awesome! I'm sure there are nitty gritty details, but this sounds like the model we need.

As far as less profitable majors or high risk individuals, they can remain in the traditional system and pay up front. You don't have to totally scrap everything else. If you truly want to study Russian literature that's fine, stay in a traditional system, but don't force the rest of us to accept it just because you want to be a special butterfly edge case. We should not be catering to those types. Eliminate guaranteed federal loans and the price of those majors would come way down anyways. If you truly want to preserve some niche program, some strategic investments on the schools part could set up something that returns enough money to allow a handfull of true scholars who do well but are too poor to pay up front still attend and get their niche major.

You may even see the emergence of a school that has radical teaching methods that turn high risk students into earners. Probably a system you can't even fathom yet which involves some level of psychology and counseling along with your education to get you to the finish line.


This "special butterfly edge case" == anyone who wants to specialize in the humanities attitude will probably lead to a bleak future. Life does not begin and end with technics nor economics.

Supporting the continued interest in the historical, artistic, cultural, literary and philosophical development of mankind and likewise supporting the preservation of these fields shouldn't be seen as 'catering to those types'. If you'd like to live in a world devoid of art, culture, and history, but efficient, logical, and completely determined to the apex, be my guest; it sounds like tons of fun.

If these systems are to be adopted nationwide they'll have to figure out a reasonable way to fund studying the humanities for more than just 'a handfull[sic] of true scholars'. Traditions and whole fields of disciplines don't live and die off the progress of a few geniuses--they are worldwide human endeavors sustained by a complex of economic, political, and pedagogical interests. Maybe that means this sort of model is only fit for 'trades', but eliminating support for the humanities wholesale wouldn't work.


An Income Sharing Agreement (with a max tuition much higher than $30K) would be great for high-risk fields like the arts and humanities.

A percentage of earnings from a single George Lucas or JK Rowling would finance the school while the vast majority of students would pay nothing.


>Good. This does exactly what Nasim Taleb argues and forces the college to have "skin in the game."

This philosophy operates under the assumption that colleges should be beholden to an economic system that values individuals solely for their ability to grow existing capital.

It's a recipe for cultural stagnation.

Where do we develop entirely new modes of thought and expression [and potential new sources of wealth] if we deprioritize every activity other than those that optimize for the growth of existing wealth?


So this is converting education funding from "debt" to "equity", by demanding a chunk of the salary of its graduates.

It's not completely unheard of; airline pilots often have a similar this arrangement because their training is so expensive. However this is the dark side of a "human capital" approach - the educational capital exists in one person's head, but the return on capital is partly owned by someone else.

It does however share risk back to the educational institution, which has become a problem of people being left stranded by imcomplete courses or worthless degree-mills.

> Critics of such programs have argued they are a form of indentured servitude. The percentage of income that Lambda takes — 17 percent — is high, and has even been described as predatory. And Purdue’s program is even more aggressive: It is a loan-like arrangement that could charge high-earning students 250 percent of the cost of their education.

Hmm.


> At Lambda, students pay nothing upfront. But they are required to pay 17 percent of their salary to Lambda for two years if they get a job that pays more than $50,000.

This appears to create a cliff:

If you make $50000 a year, you keep $50000 a year.

If you make $51000 a year, you pay 17% ($8670) and you keep $42330. That extra dollar cost you a ton of money.

It really ought to be a marginal rate like tax brackets.


There is a cliff, as a person with an ISA with a similar program (Holberton School), there's really no disincentive to seek a high paying job. The ISA doesn't expire, if I'm making below the threshold then it just gets deferred until I make above the threshold.


At Lambda School, the ISA does expire after 5 years of not meeting the income threshold.


It turns out that people usually work more than a few years, and their salaries rise over time. It would be counterproductive not to negotiate the highest salary you could (because you'll probably go upwards from there).


> It turns out that people usually work more than a few years, and their salaries rise over time.

It also turns out that people know this and don't appreciate your trite condescension.

Even more amazingly, it turns out that when people get a raise they expect to actually take home more money, which is only possible when the rate of taxation or whatever this thing is acts on marginal income rather than total income.


In an ideal world that would be possible/simple. The real solution is to get someone a job that pays more than $50k/yr.


We're asking the wrong questions. A full semester at my local community college is under $1000. Extrapolating to four years of undergrad education, that's $8,000 total.

WHY do we need this never ending whirlpool of sophisticated financial schemes to take care of this problem?


This might be the case for small community colleges but public universities are closer to $400 and $500 per credit hour. See [0] for an example.

[0] https://www.collegetuitioncompare.com/compare/tables/?state=...


That data shows that most 4-year public colleges in Texas are less than $300/hour, with some less than $100/hour. The average is $238/hour. (From https://www.collegetuitioncompare.com/compare/tables/?state=...)

Most people tend to discount the cheap, unknown schools. But they're accredited, which means they provide a vetted curriculum and their degree satisfies prerequisites for higher degrees at other accredited institutions.


Yeah, that's what I mean. Universities are far more expensive than they need to be.


But would a community college degree give me as high a level of education in as short of a time period as I got from Holberton (a similar program to Lambda School)? With an ISA, the profit incentives of the education provider and the student are directly aligned, so education providers are more incentivized to innovate and provide greater value.


That’s true, but community colleges can’t award baccalaureate degrees. You would still need to transfer to a more expensive four-year university after 2 years (at least here in California).


What school is that? That’s very low.


One that's heavily subsidized by its community, the same way most public universities in the United States used to be. The neverending slashing of education funding at the state level has led to sky-high student debt which leads to bad ideas like this one.


I still have never seen tuition that low, even subsidized


In California Community College is $46/unit for California residents. Typically people take 10-15 units. There are a few additional fees probably total under $100/semester.


They used to be free, too, not too long ago.


While interesting, this is not a new approach.

I graduated from App Academy in San Francisco over 5 years ago, paid a percentage of my income for 6 months in my first engineering job, and after roles at Stripe and Bain Consulting, have never looked back.


App Academy has replied back to the New York Times through twitter: https://twitter.com/appacademyio/status/1082723232782868481


Out of curiosity, does Bain hire a lot of web developers?


Great question! I asked myself the same thing initially. Bain now has a design and development lab to help solve problems using software. We add human driven design and development to the traditional Bain toolkit. Its an interesting role to say the least!


Congrats to Lambda School on finding a way to get companies to pay for employee training.


:) basically


Another sounds too good to be true because of just that. there are only the feel good details in the article and not the nitty gritty that is needed to even make it plausible.

so, with regards to not paying it back if they don't land a job. how long are they held to that commitment? do we also look to see if they have another means of support? five years, ten, twenty?

with regards to not paying up front, perhaps if we cross that one taboo. not every degree is worth its cost and many not worth having money risked to obtain them.

but the big reason education is expensive is because government is free with loaning the money but not putting restrictions on what colleges can charge per course hour nor what those hours encompass. treat it like medicare/medicaid where the government sets the rates per course credit and you can guarantee colleges will fall over themselves to get that government money and loans


> so, with regards to not paying it back if they don't land a job. how long are they held to that commitment?

The agreement lasts up ton5 years. If you haven’t paid back at the end of 5 years it goes away and you owe nothing.

You can also pay upfront, but most students don’t have enough cash to do so.


it's also possibly cheaper to pay up front -- 20k vs up to 30k if you pay on the installment plan afterwards.


Yes it likely is cheaper to pay upfront


You don't pay anything back until you're making at least $50k a year. Not sure what the life of the contract is, but I've been following the Lambda school guys on Twitter for a while and they seem very focused on a 2-3 year payback.

A lot of the criticism of Lambda School seems like unfairly comparing some ideal of education with their model, rather than comparing the current reality, which is colleges that frequently leave people in $30k + worth of student debt with no guarantee of a job afterwards, and that's before we talk about the years you sink into it. Then there are the learn to code bootcamps which seem to be garbage in general.

I'd be willing to bet for most of us, paying 17% of our income (once we made $50k) a year, for two years, is a vastly preferable to whatever we've paid.


> I'd be willing to bet for most of us, paying 17% of our income (once we made $50k) a year, for two years, is a vastly preferable to whatever we've paid.

Except the Lambda School ( I think it says in the article) is a 6-month program. If you're talking about paying for a four year degree, I think you have to multiply by 8 or so.


This is replacing student debt with student equity.

Here's some thought on debt and equity: https://en.wikipedia.org/wiki/Modigliani%E2%80%93Miller_theo...

AKA the "capital structure irrelevance principle."

My thoughts for some reason wandered that way, but I was actually going to address another issue: as long as it's expensive to go to college, you can't win. There's no free lunch. If college were cheap, you could spend a few years improving your future earnings. If it's fairly priced, you can't. It's as if everyone will be trapped by efficiency, though I haven't quite fleshed this out in my mind.

Of course college is not the only thing there is, but it's a fairly big aspiration for a fairly large chunk of the population.


Where do you see "equity"? This is replacing a student loan, with a no barrier of entry, no approval needed, student loan.

If the housing market is any example of what happens when entry is eased (low % rates, etc), we are looking at student loans being a lot higher than they are now.


The "school" is "buying equity" in the student (which may or may not end up being worth something).


Congratulations on the round Austen and team!

One thing I have always thought about when it comes to incentives in this model is that you have an incentive to only take in students that are likely to finish the degree and get a high paying job. This could lead to pattern matching people from backgrounds that are likely to do well due to demographics. How do you think about this and do you have any systems in place for minorities?

(copied this comment from https://news.ycombinator.com/item?id=18856135)


I’d like to congratulate the brain trust at silicon valley for inventing public education and taxes


Except it's not.

"Public education and taxes" (1) means everyone pays into the system and then people can enroll without any additional payment (or maybe with diminished additional payment).

You could also have publicly insured student loans (2), where the student pays tuition with a loan and then if they later default on the loan then the public eats the cost.

But this system (3) is neither. In this system, you get your degree and then you start paying for it when your income is enough to afford it. Importantly, if you never attain that level of income, the _University_ eats the cost.

System 2 can lead to ever-ballooning college costs concurrent with gluts of worthless degrees, because universities are incentivized to enroll as many students as they can at as high a tuition rate as they can - they always get paid.

In system 3, the university only gets paid if the student's degree turns out to be marketable. It (hopefully) keeps costs down in a way the (1 & 2) cannot. On the other hand, this could be terrible news for departments that issue degrees in literature, anthropology, etc.


I was thinking exactly the same, although a bit less passive agressive in the tone :)

In Denmark (where I'm from), there is a system where education is free. There are private schools, but to my knowledge no private universities. Your entry ticket to a university is your grade from high-school. You actually get some money while studying. You can still chose to do a studen loan on top of that, but typically people come out of university with maximum $20k in debt most way less.

I have many friends that are absolutely brilliant and successful, who would probably not have been able to afford a university degree.

One thing is what that does to the crazy debt many people get in other countries, but think about what it does for low-income areas, immigrant and integration and general inequality of a population.

By all means, Denmark is not perfect. But I think we nailed it with access to education.

And yes. Our tax pressure is pretty high. But surprisingly not that much higher than for example California and NY.

Martin


I'm of the class of 2009, graduating at a time when even entry-level office jobs seemed out of reach. I was an Econ major at a top US liberal arts school, with two summer analyst (finance) positions under my belt. But even with all that, the only full time job I was able to get was a book-keeping position that paid $12.50/hr.

If you don't have job-ready skills (e.g., Quickbooks expertise at a small business), your prospects are limited to big corporations that hire on the basis of a regular recruiting schedule, provide training, onboarding etc. And those firms ghosted completely that year.

I'm not from a rich family, so I would have much preferred to have done school in a short-term program like this that was incentivized to help me hit the ground running when it came to job-ready skills.

That said, what is to stop Lambda-like firms to crop up everywhere, like bootcamps did, and promise 6-figure salaries that will never materialize? The VC money required to finance such schools is certainly out there, but are the jobs?


This seems like a good way to focus universities on degrees and skills that are in demand in the work place. There is growing criticism that many academic programs lack rigour and aren't meaningfully related to the job market. Tying the success of the institution directly to the success of the students seems to be the ideal solution to that.


>> What if there were a way to eliminate student debt?

The obvious answer would be "free higher education", like in most EU countries and I believe many non-EU countries, have, and like many US institutions offered in the past.

Unfortunately what is being proposed is insted baptising debt by another name, so that it doesn't sound like debt.


I thought this was going to be a bit more radical, like a market for students that companies would pay into. I could see something where you could take "aptitude" tests that would get you tuition funding from a company if you showed some signal that you could be useful to them, but I guess that's basically just a scholarship... Also they can't force you to work for them once you are done, so that's a problem. One thing It would be useful for though would be to strongly signal when there is a LACK of demand in a specific area. It might save some people a lot of heart ache and money getting a "useless" degree.


This isn't new, we do this in the UK and it's still rubbish (but arguably better than having a $200k student loan balloon from interest while you're pouring coffee). Someone correct me if I missed something.


The school doesn't get paid if the student doesn't get a job. Pretty different.


It's jarring as an English speaker to see this North American usage of the word "tuition", as a fee rather than a service. It took a couple of seconds to parse the title.


Yes. It used to be called a "tuition fee". but people are lazy and don't know where their words come from.


I like the concept that the mining industry has developed. Its calle NSR ( net smelter return). A company will loan money to another miner that has a deposit but lacks money. The miner will use the money to build the mine and when they send their ore to the smelter, will pay back a percentage of the value of that ore to the company that loaned the money. Replace miner with student. Company issuing the NSR with teachers.


Why not just let the market do what it wants? That’s how we got Lamda School in the first place. That way there could be income-sharing schools like Lamda School for trades that make financial sense. For degrees that don’t make financial sense, students could pay for them upfront, as many already do.

The government never had to be involved with financing higher education to begin with.


> The government never had to be involved with financing higher education to begin with.

The government needed to become involved to make education affordable to students without wealthy parents. If the market was going to take care of that by itself, it would have happened before the government got involved.


Affordability has gotten worse since the government started giving loans. The non-wealthy students still have to pay their tuition.

I think you might mean accessibility. Government loans do expand access, but so does the private income sharing model. There are market-based ways to serve the poor education, and arguably where it does it’s more affordable, and incentivized to lift them out of poverty.


App Academy was the first company to do this, many years ago. https://twitter.com/appacademyio/status/1082723232782868481


This is an interesting idea and generates a lot of questions.

How does this change the dynamic of 'going back to school' for an alternative degree? If the domain I initially studied starts hurting economically and I have to get a different degree, do I still owe the school for my initial degree if I get a job that meets the income threshold off my second degree? How do we determine which degree netted me my current job? (assuming I get the new degree and a job within the N year period during which I owe the initial institution a percentile of my income).

Am I able to 'pay out' at any time? Or, if I get a better paying job, does the institutions paycheck increase if I'm still in the payback time interval? Do I simply need to pay the pay cap?

Should I be comfortable with the notion that my institution is x% responsible for my wage-earnings and overall economic worth? Are there situations in which this isn't the case?

Does this change promote student assessments that are better or worse for the edification of the next generation? As the article states, would schools be tempted not to bother with 'high-risk' students? What does it mean to put a label like 'high-risk' on a student? What does it mean to treat a human being like an investment? Does this reduce interest in students to purely economic terms (a big part of how universities already conceive of their students today, but reputation to some degree still factors in)? Would such a model further exacerbate the gap between the wealthy and poor—would wealthy kids, who grow up in environments that promote study and make them 'low-risk' investments (likely to succeed) have an unfair advantage over kids growing up in poor households?

This also seems to imply that one's learning is the majority of what factors into one's getting a job. What about all the additional work it takes to get a job (networking, etc.) Will these institutions assist in these areas as well?

What of the notion of scholarship? Is it absent in this model?

Does this model actually work for all disciplines? Arguably, it creates a very tight coupling between the 'value' of an education and wage-earnings/income. What of those pursuits that seem to be valuable, in a different light and aren't (today) usually high-income generators ,e.g. the study of history, literature, and cultures, for instance. What will happen to those disciplines under this model? Is this a model that's more appropriate for trades and not all areas of education?

Seems like a very good change, potentially, but it will probably a lot of effects if its adopted nationwide, on both an economic and cultural level.


Quebec (Canada) has a system like that, it's called free higher education, and you pay with a fraction of your salary called "income tax" (it's actually 2k$ per session, not completely free)


But some of that income tax gets lost in the education system. It would be much efficient to just pay back to the school you went to. Then there’s no chance of it getting spent at levels above the school.


IMO a great idea and could flip the table on ivy league schools and other institutions that favor political connections over an individuals potential.


So basically you just described income tax


Except the school only gets the money of people who attend the school.

And the school is not incentivized to sell worthless degrees because it won't get paid when it does.


Hmm well given how essentially all salaried jobs require a degree today it’s hard to see education as being an optional purchase for most people. Maybe 30 years ago but not today.

Hard to say what’s worthless or not - jobs change all the time. Few if anyone would study something like Latin or philosophy if money were an incentive.

Also the idea of human knowledge being locked away for only those who can afford it seems cruel to me


So you get an education for free, then pay back into the system after you're in the workforce? Congratulations, silicon valley, you've just re-invented public education!

Imagine what our public universities could look like with solid funding increases (which would be a fraction of that 17% that this group wants to take). They could be both free and amazing.


> Congratulations, silicon valley, you've just re-invented public education!

There is a key difference. With public education, the excess cost of the education is born equally by ALL taxpayers. With education that is funded by a percentage of future income rather than a fixed up-front cost, that is born only by the graduates. It means that those not fortunate enough to attend college (or not interested) are not expected to subsidize the students, and it also means that students can choose from a range of different qualities (and costs) of school.

Also the original article spoke at length about aligning the incentives of the school and the student. If you believe (I do not) that the only or most important role of a school is to prepare the student for a more lucrative job, then this alignment of incentives is a significant value of its own.


Also, it's voluntary. Taxation is involuntary.


"Imagine what our public universities could look like with solid funding increases"

The reason we're having this conversation in the first place is precisely the "funding increases" they've been experiencing. If this isn't enough "funding increase" for them: https://rpreschern.files.wordpress.com/2013/09/college-tuiti... then I'd have to suggest "funding" is not their problem. What they'd look like with "solid funding increases" is pretty much what you're seeing right now.


Thank you for posting this. As in healthcare, the problem isn’t so much the inability to pay as it is that costs spiraling out of control for no added value.

Prices tend to do this is a supply constricted market when demand is artificially boosted by government subsidies.


The 17% is capped at $30k and only happens if the student gets a job that pays $50k+. If the student doesn’t get a job that pays $50k+ the school makes $0.

If universities had that tuition plan they would be bankrupt.


Or, instead of bankrupt, they would likely focus on degrees that were marketable in the current economy. I feel that this option would really reduce the number students in some degree programs that aren't directly employable, or at least not at high wages.

Universities could offer this today in some programs (CS, medicine, law, etc). But what about arts programs? Music? Are these employable enough to incentivize a University to to take a chance on students ability to repay?


That's effectively how tax brackets work in several countries that have a null tax rate for people in the lowest income bracket. So only after you reach the next bracket you start paying any income tax.


Yeah, I feel like this model is a form of private taxes that is more ripe for abuse. Just do it bigger and more efficient (and with transparency and oversight) with public education.


What kind of abuse?


Public education is non-optional: when the public school systems suck, we still have to pay for them. Yes there is a democratic process to change that, but the average individual does not have much sway over that process and in effect it is much more difficult and sclerotic.

If Lambda School begins to suck and isn't educating engineers to competency, they go out of business quickly. Voluntary vs involuntary funding is an incredibly important difference.


Where is post-secondary education free in the U.S.?


Very few places, but there's no reason that it couldn't be. Such a plan would have to come with some substantial changes/restrictions on colleges to help rein in the ballooning costs (e.g. lazy rivers, gourmet cuisine) that are pushing costs up dramatically.


in california, you can apply to get your first year of community college free ( https://home.cccapply.org/money/california-college-promise-g... ), there's an assembly bill ( http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?... ) which would add a second year to that.


To be clear, I’m a big fan of the value of community college, and I think one of the greatest shamed of our current education mentality is the status quo of getting into and paying for a 4-year university. Doing 2 years at a JUCO and transferring to a full university is a path that would save many students tens of thousands with little detriment to their education.

That said, there’s still substantial differences between Lambda and a free year in college. For starters, if you have a poor GPA with a California Promise grant, it seems you have pay back the fees. Not sure what Lambda’s equivalent of a GPA is, but they don’t skim your salary if it’s below $50K. I think the more salient point is that the Lambda school has much more direct incentive to land you a good job, and ostensibly that incentive creates a stronger learning environment. Such direct incentive does not exist at a traditional state college, whether you’re paying tuition or getting a free year.

This is all a long way of saying that, while I don’t think Lambda is going to significantly impact the student debt crisis (st least in the near future), to say that they’re just putting a SV spin on the old idea of public education is overly facile.


Pithy, but wrong.




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