Lambda School pushes "income sharing agreements" where
once you're paid over $50k you pay back 17% of your income until you've paid back $30k.
Depending on your opinion, it's either a brilliant investment in students, aligning the interests of the school and the students - or it's a loan by a slightly different name, fooling the naive into overpaying for instruction from teachers who barely make minimum wage.
In theory the ISA should incentivize the bootcamp to work hard on the student's behalf. If they don't get high-paying jobs, the bootcamp doesn't get paid back.
From what I've read though, they actually bundle the ISAs and sell them off to investors--just like the mortgage-backed securities that led to the 2008 financial crisis. So the bootcamp's real incentive would be to generate as many ISAs to sell as possible, not to make sure the ISAs are any good.
When you're selling a securitized asset, you need to show the quality of that asset. You can't just pull together a pile of shit and call it AAA (Yes, 2008 was a thing, and wrong, but lets not assume here that Lambda is borderline to committing fraud).
If the ISAs don't perform, then Lambda will (likely) have no future in selling them. Do you really think they're risking their future cash flow in order to bundle up as much bullshit as they can right now?
For the consumer therefore it matters what the actual value of the thing they bought for $30k is.
Will it lead to a $150K job, or a $80K job?
Will not doing it lead to a $80K job?
For the company, what risk do they have if most students will earn over 50K regardless of the quality of their product?
I'm not good at economics, but I think one can look at this deal from both the consumer and the provider and see that there are flaws from both sides. Trust is key.
And in this context trust doesn't scale, you need good teachers for every [class size] students. That means profit only scales linearly with good teachers (the scarce resource).
Marketing scales though, and what matters to the consumer is how much they believe the actual value is compared to the competition for what they believe their options are.
How many people do you hire from other places? I'm never hiring anyone again if I can help it, so I'm not the target either, and this sort of post seems to imply this is a huge loss for Lambda but I'm not sure it is.
The bootcamp I went to had someone with a perfect SAT and an engineering degree from Princeton. She is wicked smart and works for google. You would be crazy not to hire her just because she went to a bootcamp.
This is roughly how UK student loans work too. You typically borrow £55k for a three-year degree, but then repay at 9% of your annual earnings above £26,575.
There's also a rule that the remaining debt is cancelled 30 years after you graduate. Most people (perhaps not most programmers) won't repay the whole debt within 30 years. So for them, this is essentially a kind of tax, rather than a debt.
> fooling the naive into overpaying for instruction from teachers who barely make minimum wage.
Regular degrees are pretty much just like that as well
The problem with regular degrees is not their actual cost. It's that you're sold (and most people want to buy) the experience. That's where they compete (and what "drives costs" up).
Don't play that game. Though of course not studying in an Ivy League univ. means you don't get to be buddy buddy with the next Mark Z which might just offer you a job at a nice place because you were buddies and oh this "entry level job" starts at 200k and there's your student loans sorted. But that's if you're moderately lucky and are competent at either tech and/or some form of people skills.
(before I "something something public education something something it's cheaper to study somewhere else even considering relocation costs")
Depending on your opinion, it's either a brilliant investment in students, aligning the interests of the school and the students - or it's a loan by a slightly different name, fooling the naive into overpaying for instruction from teachers who barely make minimum wage.