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Education Businesses United States

No Tuition, but You Pay a Percentage of Your Income (if You Find a Job) (nytimes.com) 472

Posted by msmash from the how-about-that dept.
What if there were a way to eliminate student debt? No, really. Student debt reached a new height last year -- a whopping $1.5 trillion. A typical student borrower will have $22,000 in debt by graduation, according to the National Center for Education Statistics. Now, Silicon Valley is backing a novel idea that proposes to rewrite the economics of getting an education. From a report: The concept is deceptively simple: Instead of charging students tuition -- which often requires them to take out thousands of dollars in loans -- students go to school for free and are required to pay back a percentage of their income after graduation, but only if they get a job with a good salary. The idea, known as an Income Share Agreement, or I.S.A., has been experimented with and talked about for years. But what's happening at Lambda School, an online learning start-up founded in 2017 with the backing of Y Combinator, has captivated venture capitalists.

On Tuesday, Lambda will receive $30 million in funding led by one of Peter Thiel's disciples, Geoff Lewis, the founder of Bedrock, along with additional funds from Google Ventures; GGV Capital; Vy Capital; Y Combinator; and the actor-investor Ashton Kutcher, among others. The new funding round values the school at $150 million. The investments will be used to turn Lambda, which has focused on subjects like coding and data science, into a multidisciplinary school offering half-year programs in professions where there is significant hiring demand, like nursing and cybersecurity. It's an expansion that could be a precursor to Lambda becoming a full-scale university.
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No Tuition, but You Pay a Percentage of Your Income (if You Find a Job) More

No Tuition, but You Pay a Percentage of Your Income (if You Find a Job)

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  • With Apologies to Rick and Morty (Score:5, Insightful)

    by Anonymous Coward on Wednesday January 09, 2019 @12:36PM (#57931660)

    "and are required to pay back a percentage of their income after graduation"

    That just sounds like slavery with extra steps.

    • Re: (Score:2, Insightful)

      by Anonymous Coward

      Well, Indentured Servitude really.

      • Re: (Score:2)

        by 1ucius ( 697592 )

        Or maybe the current income based repayment system?

    • Re:With Apologies to Rick and Morty (Score:5, Interesting)

      by Anonymous Coward on Wednesday January 09, 2019 @01:05PM (#57931938)

      Pretty much.

      The idea would make more sense if it's flipped around. The employer pays the school an annual fee based on the level of education achieved, and the school also behaves as a union for the employee, so that all its' graduates actually get decent paying jobs and don't wind up being college graduates working at McDonalds after their dream job doesn't materialize. This would incentiveze universities and colleges to actually produce workers that are needed, instead of the current status quo where students pick whatever program floats their boat and has no practical use at all. If you want to pick a program with no practical use, you're welcome to pay for it out of your own pocket.

      If a student has mutiple degrees, then the employer will be paying for ALL of them. An employee at any time may withdraw from the University "union" by paying the full remainder of tuition in full. But until then, any job they get, even at McDonalds, must pay into it. This would also disincentivize some jobs from "requiring" education when it's not truely needed.

      If an employee's school credentials is foreign (eg the "doctors are driving cabs, and nurses are being housekeepers" situation that is too frequently true) then the employer is still required to pay into it, however the funds are held in escrow inside the country (Eg Canada, US, Australia, Japan) until the school makes a formal request for it. This ensures that schools are incentivized to keep in contact with their graduates so they get money for tuition owed, and that the money is never handed back to the employee unless their tuition has been paid off.

    • Re:With Apologies to Rick and Morty (Score:5, Interesting)

      by lgw ( 121541 ) on Wednesday January 09, 2019 @01:06PM (#57931950) Journal

      That just sounds like slavery with extra steps.

      Would you say the same about a credit card?

      With one tweak, I really like this idea: not a percentage of your salary, but a percentage of the amount your salary exceeds the median wage. If you're still working retail after graduation, the college didn't do you any favors.

      • Would you say the same about a credit card?

        I would!

        No credit, no credit cards, and I have more disposable income than anyone I know. Mainly because I am not paying it out to CC companies.

    • That just sounds like slavery with extra steps.

      It differs from slavery in the same way that making love differs from rape: consent.

    • Actually it sounds great and I've been promoting this for a while. You needn't take loans (I didn't. I worked full time and took classes at night.)

      Also you only pay if your salary is over a certain amount. That makes a lot of sense.

      It will be rejected because no one would pay for people to take Gender Studies. I personally would invest in a fund that promotes STEM students.

      You have no student loan and only pay (say) 10% of your salary on anything you make about 2x the national average. Sounds like

      • Re: (Score:2)

        by es330td ( 964170 )

        You have no student loan and only pay (say) 10% of your salary on anything you make about 2x the national average

        I prefer 10% of the amount above the standard tax deduction. If the government is going to say "each person gets to deduct the basic cost of being alive" then anything above that is "extra" and would be subject to the 10% fee. This would still allow people to enter low paying fields. The fund, of course, would be allowed to limit the number of students in those fields through something like a random lottery of applicants.

    • Not really. With an ISA, you technically don't have a qualified student loan. So graduate, declare bankrupcy, and start with a shit credit score and no need to pay anything back.

      That said, this cost actually seems reasonable, 1/6 of your income for two years. So, 1/3 of one year's income. And it caps at 30k (per year? it's unclear). And only if you make more than 50k a year. So, you're flipping burgers? No debt collectors are chasing you.

      So, two years of misery to be debt free, that sounds like a rea

  • In the 80's when I applied to expensive colleges, some (yale, IIRC) described a very similar financial aid package to me.

    • Re: (Score:2)

      by ceoyoyo ( 59147 )

      Everything old is new again, particularly if you're in Silicon Valley. We called these "bursaries" although I realize that in different places that term might imply slightly different arrangements.

    • Re:Haven't Ivy leagues done this for decades? (Score:4, Informative)

      by ranton ( 36917 ) on Wednesday January 09, 2019 @02:55PM (#57932872)

      Any country with government paid post-secondary education, and progressive taxation, also does essentially the same thing this article proposes. With progressive taxation, members of society who are most benefiting from their own education and/or the education of their fellow citizens (and employees) pay more of the cost of government. So in affect, they are paying a larger proportion of everyone's "free" post-secondary education.

  • How much of that debt is for vocational schooling? That seems to be all that this would address. I wouldn't want it any where near a normal University, for fear it would kill off the less lucrative subjects.

    • Re: (Score:3, Insightful)

      by lgw ( 121541 )

      I wouldn't want it any where near a normal University, for fear it would kill off the less lucrative subjects.

      Lucrative = valuable to society.

      Yes, yes, I know, people really hate admitting that. But this is how we measure the need for one more person in society doing whatever it is. If there's a great need for another person, it will pay well. If more people want to do it than are needed, it will pay crap, even if the field is very necessary to society (like teaching), it may be we already have an excess of qualified people, and don't need more right now.

      Of course, there's a different argument. There are those

    • Re: (Score:2)

      by Mashiki ( 184564 )

      Likely very little. Going to a vocational school usually sets you up well for a job right out of the gate, either because you have hands-on training via co-op programs, or because you work part-time with a company/shop/etc and get hands on experience. There's a lot of companies that directly hire via these types of programs too. Those normal universities though? That's where your debt is. The people protesting student debt, are the ones complaining that they can only work as a barista at starbucks with $

  • HECS (Score:2, Informative)

    by Anonymous Coward

    So basically this is HECS (or whatever they call it now) in Australia....

  • Already exists in some countries (Score:5, Insightful)

    by ark1 ( 873448 ) on Wednesday January 09, 2019 @12:39PM (#57931694)

    It is called - taxes.

  • That is a debt (Score:2, Insightful)

    by ardmhacha ( 192482 )

    If you owe someone something (even if it is a percentage of your earnings) that is a debt.

    • If you owe someone something (even if it is a percentage of your earnings) that is a debt.

      Dude, is this actually in dispute? I mean, read the gist of the matter.

      • I bet some lawyers and policy makers will argue over the difference. It might matter, for instance in countries where there really isn't such a thing as credit history and lenders look at your outstanding debt instead. I remember a few years ago when the Netherlands turned student stipends into loans, with the promise that these would in no way, shape or form be treated as regular loans, i,e. they won't affect your credit rating. Que the banks, who made no secret of the fact that yes: they absolutely do

  • That used "peer instructors"

    I love the scam

  • That's called taxes (Score:2, Insightful)

    by Anonymous Coward

    You already pay a percentage of your income if you have a job. This proposal is a matter of budgeting your taxes to fund education. It's plain and simply that.

  • are all costs coved / rolled in to the plan? or is room, books, fees need there own loan?

  • I wanted to call it "The Institute."

    I'm glad someone with means is exploring the merits / shortcomings.

  • An online bootcamp by any other name.... (Score:5, Informative)

    by Anonymous Coward on Wednesday January 09, 2019 @12:48PM (#57931774)

    Read the fine print.

    1. They say you have to pay them 17-20% of your earnings for _ANY_ job, even if you didn't get that through what they taught you.

    2. They do their own financing because they're not an accredited institution, so you can't even use that "degree" elsewhere.

    3. They were forced to remove "University" and "Professor" from their language, as those terms were not being used correctly.

    4. This is just a bootcamp that charges you $20,000 (up front) or $30,000 (through this scheme) for a 30 week MOOC.

    5. Even though they have a $50,000 minimum salary before you have to start repaying (which is deferred for several years until you are at that point), they don't adjust for cost of living. Someone in California or New York (where they hold their schools) will make that and still be below the poverty line.

    6. Their success stories are suspect. There was one guy who they claimed landed a full-stack developer position, without also pointing out he had a bachelor's degree, and he had participated in a year-long bootcamp before doing this one.

  • student athlete scholarship should have the same thing! with funds being used to help others pay for school.

  • I wonder where they dreamt up this idea (Score:5, Informative)

    by Computershack ( 1143409 ) on Wednesday January 09, 2019 @12:49PM (#57931792)

    Oh wait, it looks EXACTLY LIKE THE METHOD THE UK USES for its student loans repayments. In the UK you're charged a max fee for tuition and the student loans company gives you a student loan to cover that and maintenance which is calculated so there are limits that people can get. You repay the student loan once you start earning over £480 and it is deducted from your pay at a rate of 9% of everything over the £480. After 30 years anything unpaid is written off.

    More info here: https://www.gov.uk/repaying-yo... [www.gov.uk]

    • You repay the student loan once you start earning over £480 and it is deducted from your pay at a rate of 9% of everything over the £480.

      To clarify that was £480 a week.

    • Re: (Score:3)

      by jrumney ( 197329 )
      In the UK, once you've paid off your loan, you stop paying it back. I think the scheme they are looking for is to trick people into thinking they are not getting a loan so they can keep taking repayments until their die.

  • This is well intentioned, but misguided. Here's why:

    We already have a problem with too many students going into low market value degrees and too few into high market value degrees. This is partially because there are many low market value degrees that are easier to earn. If you charge a fraction of future income, you are charging lower (or no) tuition for degrees that have low market value. And you are charging higher tuition for degree that have high market value.

    People respond to incentives. This scheme i

  • I don't think the overpriced private schools should be a part of this, they'll just jack their rates even more.

  • Details from the Article (Score:3)

    by Marc_Hawke ( 130338 ) on Wednesday January 09, 2019 @12:50PM (#57931812)

    17% of your salary for 2 years, if you get paid over $50,000.
    0 if you get less than $50,000.
    (pause if you get fired)

    Math:
    17% of 50,000 is $8,500. That means you only pay $17,000 for your degree.
    (It also means you're only making $41,500, so you're better off negotiating a salary at $49,999.)

    • Re: (Score:2)

      by solios ( 53048 )

      (It also means you're only making $41,500, so you're better off negotiating a salary at $49,999.)

      Tinfoil hate time: Maybe this is a long-term plan to drive down employee salaries?

  • 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... Payments are capped at $30,000

    The article doesn't say what tuition costs are, but considering a "decent" private school is about $30-50K a year and state schools ar about 17K a year around here, it seems like a not terrible deal, if Lambda is accredited, and ends with a 4 year bachelors degree.

    If it's a 2 year diploma mill arrangement, maybe not quite as good, but probably still a

    • If it's a 2 year diploma mill arrangement, maybe not quite as good, but probably still a better deal with no interest accrued on a loan

      Worse than that, it's half-year long vocational training. No accreditation. The interesting part of this story is that real universities are also interested in the scheme.

    • Re: (Score:2)

      by ceoyoyo ( 59147 )

      30 weeks (6-7 months), non-accredited, purely online.

  • Anyone who makes a lot of money relies at some level on those with a university level education. Why should we be giving a tax advantage to someone who employs university-educated people instead of gaining one themselves? The entire point of a progressive tax system is that, regardless of background, if you are making lots of money you are able to pay a larger fraction back to support the society which got you to where you are.

    If we start having tax rates which depend on what benefits you have derived fr

  • Maybe colleges should stop being expensive (Score:5, Insightful)

    by Junior J. Junior III ( 192702 ) on Wednesday January 09, 2019 @12:58PM (#57931884) Homepage

    Or, what if, hear me out now, what if colleges stopped the campus beautification arms race, and quit spending hundreds of millions of dollars on new buildings, and then passed the cost savings on to students?

  • Make Indentured Servitude Great Again.

    In the meantime I'll just leave this here [fivethirtyeight.com]...
    • that's a bit off topic, but I'm fed up with seeing politicians gutting public institutions.

      No less than Joe Biden is going around telling folks we should means test Social Security [youtube.com] to keep it solvent (instead of just raising the limit on how much can be taxed due to inflation). He's being clever about it too, saying the "rich don't need SSI". Next it'll be the "Well to do" and then the "working class" and finally the program gets shut down and they pocket the money I paid in.

      I don't know what's wors

  • Don't tell me how much they've raised from investors, as some metric to the viability of a concept; investing is risky by nature. How many expensive failures do we need to see before we understand this concept?

    Not that I'm apposed to the idea, necessarily, but I'm not sold that it's any better than our current system. It sounds like a tax on the rich to subsidize the poor ( and poor decision makers who pursue lower-value degrees because "DREAMS" and all ). In essence, it sounds like an abdication of pers

  • Education (in America) is free for grades k-12, but then astronomically expensive after that, depending on your career choice?? Seems like it's beneficial for society to grant free education. This bit about paying a percentage of your income back, to pay for college seems like a shitty way to tax people that get an education, so why not just come up with a tax that we all pay for all of our free education? This would be a federal sales tax, in my mind.

    • You're not a parent? Not free at all even aside from tax, the yearly fees run to over $1500 for public schooling, per child

      • It's based on property taxes...1/2 of my town's property tax goes to the schools. It's a LOT more than $1500

  • I'm sure they would love this plan. Here is a thought for the top 20 tech companies, stop discriminating based on degrees, diversity, and racism in favor of asians and young people and go back to focusing on actual skills and on the job training. You can pay some money by simply not paying people more for having degrees or only counting degrees more realistically as being maybe 1/2 years of experience.

    Also stop encouraging churn. Cycling people out every six months means you have more options with more skil

  • The school would determine what you need to get trained in, as their ROI depends on students maximizing their 20% donations. High-paying jobs are the ones students will be trained for - creating an excess of workers in such positions, thereby lowering wages for high-skilled jobs, which is the eventual payoff that Peter Thiel seeks. Fuck that guy.

  • So if I run up 20 or 30K$ in debt for my liberal arts degree and the only job I have available is as a barista, I still have to pay?

    On the other hand, with my software engineering degree in hand, I go to work for a startup. And agree to take minimum wage (not a "good salary") plus an equity stake a few years down the road.

    • odds are overwelmingly that startup will fail and you'll be screwed. best avoid that scam for screwing work out of people. work for a startup that is well funded enough to afford good talent

  • What does this say about the many people who fall for the 'free internship' scam? They don't even have a right to start working off their debts immediately.
  • Also.... does anyone remember when companies paid for training?

  • The current student loan framework is just like a company issuing bonds to finance expansion. The proposed scheme would be exactly like issuing stock. The university gets equity in you, and you pay them a dividend that represents their fraction of your earnings.

  • It's called a student loan.

    All that ever happens is you get a student loan that - on average - never gets paid off, so the universities still charge fees anyway.

    What you do is pay people's tuition, but only if they're actually progressing and keeping up and not failing their tests. Or what, in my day, was called a "grant".

    My uni tuition was entirely paid for by grant. I had to pay only living expenses (but I lived at home with my parents). If I'd hadn't lived at home, I could claim more money for living

  • Comment removed based on user account deletion
  • Comment removed based on user account deletion

  • online learning

    start-up

    founded in 2017

    with the backing of Y Combinator

    has captivated venture capitalists

    Surely, this will be a great success!

  • Did they just come up with the idea of public schools?

    I mean I got a free education and now I pay part of my paycheck for it. This is not revolutionary.

  • Many states have certified online colleges for people who work at affordable costs, around 5-6K per year.

    Clearly affordable and easy to pay off, and geared at careers needing people.

    Western Governours College has degrees in IT/Tech, teaching, healthcare, business and even offer masters degrees.
    https://www.wgu.edu/washington... [wgu.edu]

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