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Education Businesses The Almighty Buck

As Student-Loan Debt Soars, Alternatives, Like Income-Share Agreements, Are On the Rise (theatlantic.com) 238

Posted by msmash from the closer-look dept.
Last year, Lavell Burton, 36, wanted to learn to code, but was surprised to find that many of coding bootcamps cost several thousand dollars upfront. Then he found a 30-week remote program, Lambda School, that was free to attend. The program would provide comprehensive web-engineering training, and would help with job placement. Once employed, graduates would be required to pay back a set portion of their salary under an arrangement called an income-share agreement, or ISA. The Atlantic dives into such income share agreements. From a report: The concept of ISAs has been around since at least the 1950s, when the economist Milton Friedman outlined them as a hypothetical model of repayment. Yet ISAs were rarely implemented until the past few years, as student-loan default spiked and schools sought to offer other ways to pay. In 2016, Purdue University launched an ISA tuition option aimed at families who might otherwise take out high-interest private loans or Direct PLUS loans for parents to fill the gap between federal student loans and the cost of tuition. Purdue hired Vemo Education, a for-profit startup, to help design and administer the program, which is largely backed by the university's funds. The private schools Clarkson University and Messiah College have since announced plans to follow suit, as has the United States Collegiate Athletic Association, which has partnered with Vemo to create ISA options for its roughly 80 member schools.

Among for-profit programs, in 2012, App Academy, a coding bootcamp with locations in San Francisco and New York, began offering a twelve-week program built around an ISA. Others, like the New York Code + Design Academy, which provides a range of web engineering and design courses, and Holberton School, a two-year program in San Francisco, have similar payment options. [...] The ISA-based programs have generated hype, as well as some early success stories. Yet questions remain about whether they are a good deal for students and if they make for profitable businesses in the long run. For one thing, there's little consensus around how much is fair to reap from program graduates, and for how long. Lambda School, for example, requires graduates earning at least $50,000 to pay back 17 percent of their salary for two years, with total payments capped at $30,000. The terms can vary widely among programs. Also, while it's clear how programs like Lambda School might help some people improve their prospects, many of them are so new -- Lambda School is one year old this month -- that there isn't much data about how people do once they get through the programs. That makes it difficult for prospective students to evaluate them.
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As Student-Loan Debt Soars, Alternatives, Like Income-Share Agreements, Are On the Rise More

As Student-Loan Debt Soars, Alternatives, Like Income-Share Agreements, Are On the Rise

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  • Comment removed (Score:5, Informative)

    by account_deleted ( 4530225 ) on Wednesday July 04, 2018 @01:03PM (#56892530)
    Comment removed based on user account deletion

    • Re:Oh wow, actually expecting a result? (Score:5, Funny)

      by PPH ( 736903 ) on Wednesday July 04, 2018 @01:29PM (#56892634)

      It's as if millions of liberal arts college's voices suddenly cried out in terror and were suddenly silenced.

    • They've always expected results from the educational paths which they're likely to offer an ISA for, like STEM.

      Or did you really think they would offer an ISA to an applicant planning to major in feminist interpretative dance therapy? No, sorry, mommy and dady are stuck paying for that one.

    • Pseudo-universities the problem (Score:5, Interesting)

      by Roger W Moore ( 538166 ) on Wednesday July 04, 2018 @02:32PM (#56892908) Journal
      First, you are clearly only talking about US universities since with a few institutional exceptions, most universities outside the US are not awash with lots of money. Second, your statements are precisely opposed to one another. You want universities to be focussed on the dollar value of the benefit to students and then want them to worry more about education and less about being a business.

      The problem with universities today are the plethora of pseudo-universities which have sprung up to fill the void left by declining school standards. These new institutions offer dubious qualifications at great expense to the student and/or the government funding them. They find willing students only because many employers no longer trust school qualifications and now require degrees, diplomas etc. for jobs which never used to require them. Funding them by what is effectively indentured servitude is just going to make things a lot worse.

      We need to fix this by raising school standards to the point where employers can use them for a wide range of jobs. While this will cost money it will also save a lot of money by making these pseudo-universities unnecessary.

      • Re: (Score:3, Insightful)

        by q_e_t ( 5104099 )

        We need to fix this by raising school standards to the point where employers can use them for a wide range of jobs. While this will cost money it will also save a lot of money by making these pseudo-universities unnecessary.

        There seems to be the presumption that school standards are falling, but if you look at PISA results, there isn't any evidence for it, and if anything, standards are gradually rising. People say "30 years ago, when I was at school, it was much better, and now employers can't trust a school leaver", but 30 years ago they said exactly the same thing. Even 2000 years ago they said the same thing.

        • There is a bias in the data based on shifts in expectations. When the economy was roaring back in the 50s and 60s, nobody cared if principals pushed out some young people who were performing poorly, because most 16 year old men could find work and many women chose to get married at a young age.

          It sure sounds bad if you say "20% of our HS graduates do not know crap" . But if you said "30% of our 18 years olds did not know crap in academic subjects back in 1960, and it is pretty much the same now" conclusio

          • The PISA scores are evidence, at least that strong negative conclusions are not supported.

            The PISA scores seem to test intelligence more than knowledge, they do not show statistics and at least one of their example questions is wrong on their website. I'm not convinced that you can draw any useful conclusions from their data.

          • Re: (Score:2)

            by q_e_t ( 5104099 )
            People get a bit to obsessed about the ordering of the PISA scores. In the UK people complained when the UK dropped down a bit, but that was more due to countries that were likely to do better submitting scores. It's like Murray being more likely to win Wimbledon if Federer and Nadal are ill, although this year it's the other way round.

        • There seems to be the presumption that school standards are falling, but if you look at PISA results, there isn't any evidence for it, and if anything, standards are gradually rising.

          Actually if you look at the PISA website [oecd.org] they only provide data for about ten years, there are no error bars and the jitter from year to year seems large suggesting that if they did include error bars they would be so large that they would indicate that there is no way to see any trend. In addition, Canada, the UK and the US all show that they have only been in PISA since 2000 so I have no idea where you get 30 years of PISA data from.

          The tests are clearly designed to have minimal reliance on knowledge

          • Re: (Score:2)

            by q_e_t ( 5104099 )

            I have no idea where you get 30 years of PISA data from.

            I don't, as PISA hasn't been going for 30 years, but it's the most objective information available external to the local education systems. Despite contentions people make of declining standards, PISA doesn't show any clear trend that would confirm that.

            The tests are clearly designed to have minimal reliance on knowledge so that they can be administered across multiple countries with different curricula. They appear to test basic intelligence without much reliance on knowledge and basic intelligence should not change much over time regardless of education. The final nail in their coffin though is that one of their test questions is wrong: it suggests that the size of an impact crater only depends on the size of the object causing it when it actually depends on the mass and velocity.

            They test things like reading comprehension in the native language, which does rely on education, and the mathematical elements also. So the idea that they are just "basic intelligence tests" is false.

            On the counter side, there is plenty of evidence of declining school standards. Employers are requiring degrees for jobs that never used to require them

            Employers wish to have the best candidates. Many more peo

          • Re: (Score:2)

            by q_e_t ( 5104099 )

            Actually if you look at the PISA website [oecd.org] they only provide data for about ten years,

            I'm surprised that it is only 10 years, as it's been going since 2000, and I've looked at data from 2000 before. Well, officially 2000 wasn't a full set of results.

    • Why don't you start with the coaches. They are consistently the highest paid staff in universities in every state of the US. [businessinsider.com.au]

  • Expensive (Score:5, Insightful)

    by rfengr ( 910026 ) on Wednesday July 04, 2018 @01:10PM (#56892558)
    Computer schools have been around a long time. I remember seeing TV ads from Control Data Institute back the the 70s. Why is it so expensive now that you need loans, or these schemes, to pay it off?
    • Easy loans make for easy profits. Especially since student loans are not dischargeable in bankruptcy court. With high schools pushing everyone to go to college, it's a win-win for for everyone except the student.

      • Re: (Score:2)

        by mysidia ( 191772 )

        Especially since student loans are not dischargeable in bankruptcy court.

        We should change the law, so that at least all the interest cost on the loan and any principal balance in excess of $25k can be discharged in bankruptcy.

      • With high schools pushing everyone to go to college, it's a win-win for for everyone except the student.

        You can't exactly blame them for that considering how we're moving more and more towards a knowledge economy and as a result both the demand and perceived value of physical labor has been going down for decades.

        You can clearly see this in how wages for low-skill jobs hasn't kept up with inflation while wages for highly skilled workers like those in tech have either kept up with inflation or exceeded it.

    • Re: (Score:2)

      by Anonymous Coward

      Why is it so expensive now that you need loans, or these schemes, to pay it off?

      Because someone has to pay the shareholders' bonuses in for-profits, and build that new football stadium in non-profits.

      In short, the answer is greed. That is all.

    • Re: (Score:2)

      by Mitreya ( 579078 )

      Why is it so expensive now that you need loans, or these schemes, to pay it off?

      College tuition is out of control. But this story is about a guy surprised that computer classes cost a few thousand dollars.

      He seems to have expected it to be free (?)

      This reminds me of people asking for various tech support "because you are a computer guy". It doesn't work the same with doctors or plumbers.

  • Sick system (Score:5, Insightful)

    by Anonymous Coward on Wednesday July 04, 2018 @01:23PM (#56892606)
    The entire higher education system is borked, and this is just one more symptom. There needs to be a massive federal review of public universities, which should be existing for the public good, but are instead ballooning in cost just because they can. They want to act like (very inefficient) private companies, while at the same time, getting state and federal funding. That can't go both ways. People say that costs are going up because loans ensure that even the poor students can go to higher education (and they very well should have that ability) but university administrators choose to take advantage of that. It needs to stop. If the university administrators aren't going to do the right thing, they should be made to.

    As an aside, universities should also get rid of all the adult daycare bullshit. I have to pay thousands of dollars every year in 'student activity fees' for the PhD program I'm in (Clemson, no problem naming & shaming). These fees are going toward things like 'Chocolate Milk Night,' 'Dave & Buster's Night,' 'Decorate a Mug Night,' and 'Tie Dye a T-shirt Night.' Not making that up, that's the sort of absolutely idiotic things people are going further into debt for.

    • Social Skills (Score:3, Insightful)

      by Anonymous Coward
      Your university is trying to teach you some social skills. Perhaps chocolate milk night isn't such a bad idea... and might actually get you laid.

      • Except that in this context, "chocolate milk night" would be racist and made to exclude white men of said laying sessions.

        • Except that in this context, "chocolate milk night" would be racist and made to exclude white men of said laying sessions.

          Just throw on a wig and a dress on and call yourself Mary and problem solved as you are hipster tranny. You may have guys trying to lay you instead though

    • Re: (Score:3)

      by DRJlaw ( 946416 )

      As an aside, universities should also get rid of all the adult daycare bullshit. I have to pay thousands of dollars every year in 'student activity fees' for the PhD program I'm in (Clemson, no problem naming & shaming). These fees are going toward things like 'Chocolate Milk Night,' 'Dave & Buster's Night,' 'Decorate a Mug Night,' and 'Tie Dye a T-shirt Night.' Not making that up, that's the sort of absolutely idiotic things people are going further into debt for.

      $60/yr [clemson.edu], with the assumption that yo

    • HR is part of the problem as well. Today they are graded on metrics as turnover. Steve Jobs application for Atari was displayed and it only had 4 questions and didn't ask about gaps of unemployment.

      Today job placement === exact job title for 2 years+ with no gaps and a college degree. The problem is some kids graduate during a recession can't find work as they have no job experience and are now unemployable by HR for having gaps. Meanwhile they still need to pay the loans.

      Also by requiring a college degree

    • Re: (Score:2)

      by dargaud ( 518470 )
      I thought it was going towards paying for a new 50000 people stadium and 10M$/year athletes/students (who are too dumb to even spell their names).

    • Re: (Score:3)

      by mysidia ( 191772 )

      'Chocolate Milk Night,'

      I don't know what that is.... but there ought to be a rule that fees can only be charged for activities which each student actually participates in, So they can have their Chocolate Milk Night, but collect a $5 for admission for anyone participating..

    • if you think that is bad there is a university in Texas that built its own lazy river, since then other universities have been been adding them.

  • the LanWan Professional school is scamy like this with hidden fees and not being up front about the true costs.

  • $30K & not even an degree they can be the best school out there but still will get you past hr but some dumb has who had an 4 year party can get an good deskjob may even the coders boss (no IT skills needed)

  • Wow! The school actually has skin in the game. (Score:5, Interesting)

    by DidgetMaster ( 2739009 ) on Wednesday July 04, 2018 @01:38PM (#56892692) Homepage
    If I read this right, if the school fails to teach the student what they need to get an actual job, then they won't get paid. If the school signs up some flunky student who never comes to class because they partied all night long every night, then they won't get paid. If the school admits students who will never make it in the real world because they have no study or work ethics, or are just too dumb to learn the material, then they won't get paid either. Sounds, like they have an actual financial incentive to admit bright, hard-working students and teach them valuable skills.

    • The problem is some students with no job experience or less than stellar resumes will be denied. The joke is on the top coding acadamies that all their students land jobs 97% of the time!!! ... because they only select the best with no gaps on their resumes and who already have some coding experience.

      In other words those who don't need them and have some extra cash stashed get in.

      The problem is low end jobs have a high turnover rate and most are very insecure as another dweeb can come in tomorrow to bag gro

      • The problem is some students with no job experience or less than stellar resumes will be denied. The joke is on the top coding acadamies that all their students land jobs 97% of the time!!! ... because they only select the best with no gaps on their resumes and who already have some coding experience.

        I mean, are you suggesting they should just let everyone in? Not everyone is cut out for programming, despite what the government or other people might say. For the coding bootcamp I attended, they tested for three things: programming ability, desire to learn and personality/culture fit (you're a team player and you're not an asshole). Bootcamp prep courses exist for a reason (so people have some background coming into the bootcamp). I came into the bootcamp with no job experience, but I also have a CS degr

  • How about alternatives like colleges that work to control costs so they can charge half as much? How about designing a college learning experience to serve the customer? And to be a good value for the customer?

    The college cost bubble will burst — I predict it happens before 2030.

    Some other organizations will show up and offer a better service at half the price, and they will still be able to pocket a nice profit. It will be much better for students and much better for employers.

    • How about alternatives like colleges that work to control costs so they can charge half as much?

      That doesn't work. Features are more important than price. When my daughter chose her college, she picked the one with the climbing wall and acai bowl bar.

  • Comment removed based on user account deletion
    • Student loans there's nothing to repossess. That made declaring bankruptcy in the past a very tempting position.(Get your degree, declare bankruptcy and they can't take the education out of your head.) Actually I remember hearing a story somewhere that triggered this change to make the secured was actually from a med student. They completed medical school and were starting residency. They did the math and saw if they declared bankruptcy that right as they finished their residency (where they'd finally start

  • Sometimes I really love Germany. (Score:5, Interesting)

    by Qbertino ( 265505 ) <moiraNO@SPAMmodparlor.com> on Wednesday July 04, 2018 @01:49PM (#56892736)

    Public College. Free.
    Semester fees apply (approx. 50 euros/month), but since the student ID comes with free public transport in the entire state I'm actually faring cheaper than a non-student.

    BTW: Did you know you can study for free in Germany, even if you're an USian? ... Just sayin'.

    • Re:Sometimes I really love Germany. (Score:5, Interesting)

      by ShanghaiBill ( 739463 ) on Wednesday July 04, 2018 @02:43PM (#56892956)

      Number of American universities in the global top 50: 32
      Number of German universities in the global top 50: 1*

      Global university rankings [usnews.com]

      American higher education is broken and needs to be fixed, but the "German model" is broken too, just in different ways. Germany churns out a lot of mediocre graduates, and has a very high dropout rate (people don't value what they aren't paying for).

      * #40 - University of Munich

      • Re: (Score:2)

        by hwihyw ( 4763935 )

        Bullshit! Do US universities use special books that German's can't use? Are US students given special knowledge in secret US university basements that the rest of the world doesn't have access to? Do US university teachers use special CIA classified teaching methods that are unknown to the rest of the planet. Both countries give you a piece of paper that say you passed a bunch of tests. THAT IS ALL. No secret sauce, no special herbs, no recipe passed down from generation to generation.

    • Now if only I could afford to live in a college town in Germany, I'd be set.

    • The people complaining are not getting into student debt because of the education, they are because they want the advertised lifestyle.
      In the US you can get an equivalent education to that in Germany in a similar setting, at a similar cost, we call them community colleges. However people don't want that.

  • Income share until obligation is paid off (Score:3)

    by russotto ( 537200 ) on Wednesday July 04, 2018 @02:17PM (#56892846) Journal

    So, like indenture?

  • Debt Slavery is the Future for America (Score:2, Insightful)

    by Anonymous Coward
    And here it is, the end result of the Fascist agenda of Wall Street and their pay off for the price of buying the Dems and the GOP these last 45+ years. Enjoy your slavery you fucking assholes. Much worse is to come. By 2030, if can't pay that $10,000 ambulance fee and $500,000 overnight stay for a broken leg you will legally be able to sold into "debt servitude" since bankruptcy for private citizens will be outlawed The primacy US is over, and Wall Street knows it. Their plan is to enslave all you fuckers

  • A student loan is also a form of "income share agreement" - you get the money, you don't have to pay it until you have graduated and can extend that payback until you get a job. The benefit of a student loan is that they're backed by the government and more transparent than these schemes.

    I get similar offers from car dealerships: 0% interest loans, pay what and when you want but the details are in the fine print, all the 'costs' of the loan are included upfront so the interest is calculated and added on to

  • Europe does it this way (Score:3)

    by nospam007 ( 722110 ) * on Wednesday July 04, 2018 @04:36PM (#56893480)

    You share your income with the state (taxes) and the state gives you free or very cheap universities.

    The system also works for roads, highways, bridges, healthcare, pensions ...
    You should try it some time.

    • Re: (Score:2)

      by guruevi ( 827432 )

      In Europe you share 50% of your income, in the US only 15%. It depends on who you want to invest your money. Schools in the US are relatively low cost and graduates on average have a better outcome compared to Europe.

      • While our average income tax rate [taxfoundation.org] is about 15% effective, that does not include the 15.2% for FICA and Social Security. Nor State income taxes up to 13.3% [taxfoundation.org], meaning that in the US, an average tax load as paid in Europe would be around 44% for a person living in California (and much higher for someone earning around $10,000 per month - about 50%). Not much different at all.

        • Re: (Score:2)

          by guruevi ( 827432 )

          I think you misunderstand the word "effective". Effectively, most people in the US pay ~15% once all is included and deducted. 20 percent of taxpayers face an average tax rate of -4.5 percent, which is essentially a tax subsidy. The top 1 percent of taxpayers face an average tax rate of 24.6 percent

          • Sure, the link to the Tax Foundation page states as much. The average for everyone is about 15%, but for top-earners it is quite a bit higher. Of course they have a lower effective Social Security tax (as it caps out around $115,000 or so), but are usually subject to the highest State income taxes. People in Europe don't really realize that their income tax is effectively the same as our Federal and State income taxes and our FICA/Social Security payments. And when you add them up - it's really not all

            • Re: (Score:2)

              by guruevi ( 827432 )

              The number of -4.5% to 25% includes FICA/SS. It is the EFFECTIVE tax rate. If you pay 50-60% of your income to the IRS today, you must get a hell of a tax refund at the end of the year.

              • Uh, no. The Tax Foundation report [taxfoundation.org] explicitly EXCLUDES all FICA/SSI (see Appendix point 3). This is for income tax only. Add another 15.2% for FICA/SSI, and up to 13.3% for State income tax. If you're a typical high-earner in California (making more than $15K per month), you're probably paying around 45-47% total tax load, before you include State/county/city sales taxes.
  • So... they basically reinvented Australia's old HECS system?

    • Re: (Score:2)

      by AHuxley ( 892839 )
      Re Tertiary education https://en.wikipedia.org/wiki/... [wikipedia.org]
      The US version of that would see people having to pass an exam.
      A scholarship exam to pass on merit that is a set amount to pay back.

      An entrance exam on merit would alter the US ability to shape on demographics for political reasons.
      Every US university would take on the demographics of the very best students with the ability to study and pass exams.

  • Problems in no particular order... (Score:3)

    by erp_consultant ( 2614861 ) on Wednesday July 04, 2018 @07:45PM (#56894118)

    1) Schools are far too focused on athletics instead of academics. Most would think that the University President is the highest paid staff member. Nope - it's the football coach. Sometimes by a huge margin. I would submit that the football coach contributes nothing towards the academic advancement of the students. Worse than that, he only contributes directly to members of the football team. But he does help to bring in lots of money for the school so that sort of tells you where the priorities lie.

    2) You cannot use bankruptcy to get out from under crushing student loans. Unlike almost any other kind of debt. You can walk away from a $1,000,000 mortgage but you can't walk away from $100,000 of student loans. Further, you have little to no leverage to negotiate payments. The lenders and schools know this, of course, which helps to explain the obscene profits made off the backs of students.

    3) HR drones. Sadly they continue to be the gatekeepers to jobs. Most of them know nothing about the jobs they are screening for and simply follow a script and screen resumes for key words. I think that department managers should do the screening (with help from experts on their teams) to determine who gets interviewed and hired. HRs one and only role should be to prevent the company from being sued for harassment and misconduct. Roll out the yearly sexual harassment videos and put up posters when its time to sign up for benefits. Otherwise stay the fuck out of the way.

    4) Degree requirements. Apart from occupations like Doctor, Lawyer, Architect, Structural Engineer, etc. I fail to see how a 4 year degree is necessary. All that matters in most cases is attitude and aptitude. Having a degree does not guarantee either of those qualities. I have worked with people with masters degrees that were as dumb as a bag of rocks. I have met really smart people, with and without degrees. Some companies are beginning to realize this by adding "in lieu of" clauses in the job description where they accept relevant experience in place of a degree so there is hope yet.

    Feel free to add to the list :-)

    • Re: (Score:3)

      by AHuxley ( 892839 )
      The 4 years shows a person can study, pass an exam. Read, write and keep time.
      Skills that lower levels of education will give a free pass on due to demographics and new political ideas about education around the USA.
      University is the last easy way to see if the person getting a job can keep time, read, has the ability to do work.

      Re "that were as dumb as a bag of rocks"
      Degrees are now given for attendance and to reflect the wider community demographics. That trust in university level results is g

      • "The 4 years shows a person can study, pass an exam." - Perhaps but completely irrelevant in the workplace. To pass an exam one must have the ability to memorize facts. In the workplace this is of little value.

        " Read, write and keep time." - I would challenge your assertion about read and write. I have worked with plenty of university grads with absolutely atrocious spelling and grammar. I fail to see how a 4 year degree is a good indicator of ones ability to keep time. Being punctual is something a child

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