Free Coding Bootcamp 'Lambda' Tries Selling Its Income-Sharing Agreements -- In Bundles (theverge.com) 34
An anonymous reader quotes the Verge:
In December, online coding bootcamp Lambda School quietly partnered with Edly, a digital marketplace that helps schools sell income-sharing agreements (ISAs) to accredited investors. The arrangement allows Lambda to receive money from the ISAs upfront, rather than waiting for students to find jobs. But it also flies in the face of the values Lambda typically espouses: namely, that ISAs align its incentives with the goals and aspirations of the students...
Lambda's ISAs promise an alternative to traditional student loans by allowing students to defer tuition until they've landed a job that pays $50,000 a year or more. When that happens, they hand over 17 percent of their income until the $30,000 tuition is paid off. If students don't find work within five years of completing the program, the ISA is automatically dissolved. It's a business model that allows Lambda to brag about investing in students — which, in many ways, it still does. The school provides living stipends and even housing to some students who need it. But reselling ISAs muddies the narrative a bit since Lambda can make money long before students find jobs...
Shortly after the arrangement was called out on Twitter, following a report by The Verge about some students' disappointment with the curriculum, Edly began taking down pages that referenced the Lambda partnership. Edly did not immediately respond to a request for comment about why these pages were taken down, and Lambda declined to comment on the nature of the partnership at all.
"I wonder why Lambda isn't so keen on seeing discussions about how students are being packed into the same kind of CDOs that brought us the financial crisis," tweeted David Heinemeier Hansson, the creator of Ruby on Rails, who's been tweeting screenshots of Edly's past statements about their ambitions as well as links to Google's cache of Edly's pitches to investors.
Last year Wired reported that nearly half of Lambda's ISAs had at least partly been sold off to investors. They also note that in January of 2019, Lambda "received $30 million from investors including Google Ventures, Y Combinator, and Ashton Kutcher."
Lambda's ISAs promise an alternative to traditional student loans by allowing students to defer tuition until they've landed a job that pays $50,000 a year or more. When that happens, they hand over 17 percent of their income until the $30,000 tuition is paid off. If students don't find work within five years of completing the program, the ISA is automatically dissolved. It's a business model that allows Lambda to brag about investing in students — which, in many ways, it still does. The school provides living stipends and even housing to some students who need it. But reselling ISAs muddies the narrative a bit since Lambda can make money long before students find jobs...
Shortly after the arrangement was called out on Twitter, following a report by The Verge about some students' disappointment with the curriculum, Edly began taking down pages that referenced the Lambda partnership. Edly did not immediately respond to a request for comment about why these pages were taken down, and Lambda declined to comment on the nature of the partnership at all.
"I wonder why Lambda isn't so keen on seeing discussions about how students are being packed into the same kind of CDOs that brought us the financial crisis," tweeted David Heinemeier Hansson, the creator of Ruby on Rails, who's been tweeting screenshots of Edly's past statements about their ambitions as well as links to Google's cache of Edly's pitches to investors.
Last year Wired reported that nearly half of Lambda's ISAs had at least partly been sold off to investors. They also note that in January of 2019, Lambda "received $30 million from investors including Google Ventures, Y Combinator, and Ashton Kutcher."
Basic market 101 (Score:5, Insightful)
Do these writers somehow not realize that if students aren't getting a job and paying off the ISA, that also means the boot camp won't be able to sell the ISAs to investors?
Would you invest in a security like that if you didn't have solid evidence that students were paying them off? If not, why do they imagine anyone else would?
There's no way a company like a coding boot camp and sit on future promises when they have current expenses. Of course they have to sell them to investors who have time to wait for their money.
In short, their boot camps might suck or might not, but selling ISAs doesn't reflect that either way, unless it demonstrates that they've at least managed to give evidence to some investors that they don't suck enough for them to be willing to fork over cash in return for promises from students.
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You are making the same naive mistake of assuming someone with cash is smart, instead of like, a ruthless, backstabbing, moneygrubbing idiot that happened to get temporarily lucky enough to get some cash together long enough for someone else to take it from them.
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Basic market 101: See the great mortgage bundle crash of 2008.
Yes, exactly. The whole idea of a ISA is to give Lambda skin in the game: Lambda only gets paid if the students do well. By selling the ISA, Lambda has greatly reduced incentive to care how well the students do. In the long term, Lambda has to worry about their reputation. If a lot of ISAs don't pay off, investors will soon only be willing to buy them at steep discounts. Eventually this ought to sort it self out.
As we saw with subprime loans in 2008, there are many people who want to get in, make a quick bu
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That doesn't mean Lambda needs to do well in order to profit, though. Probably the most profitable approach is to provide $10 of course materials, sit back and collect lots of money from the 20% of students who get jobs in the industry from their own efforts despite Lambda. Practically free money there.
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That doesn't mean Lambda needs to do well in order to profit, though. Probably the most profitable approach is to provide $10 of course materials, sit back and collect lots of money from the 20% of students who get jobs in the industry from their own efforts despite Lambda. Practically free money there.
If you truly think there's easy money to be made, I strongly suggest you go into business competing with Lambda. You should be able to vastly undercut their prices and students will beat a path to your door. Heck, you can probably even provide $20 in course materials so your classes are way better in addition to being cheaper. To quote the economics maxim, there are no $100 bills lying on the sidewalk.
Snarky advice aside, I think you're right, that is their business model. They have to assume only some perc
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Sure, if they're already worth something at least. If you offered a made up security interest in random contracts you made with no hope of them being paid, do you really think you're going to find a lot of buyers just by "selling it at a discount"?
That doesn't change the point that the better the students do, the more these ISAs are worth on the market. Meaning their incentive is still to ensure the students do as well as they can help them to without spending ridiculous amounts of money.
They just need to get them a job for a few months (Score:2)
Also anyone else remember when companies trained? And why they hell aren't the community colleges doing this for free or for a nominal fee like they did when I was a kid?
This is why we need tuition free college. Now that higher education is mandatory for employment above a McJob you'll see more and more of these scams. We're turning into a feudal society again. Modern day sharecropping.
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"Tuition free college" doesn't exist. Someone is footing the bill. Fortunately, we have examples of where free-to-the-student-college has been tried before. For example, in the UK they tried it. Ended up rationing who got to attend college, but still ended it as too expensive over time.
"Free College" doesn't work. There isn't a limitless supply, so it just means you end up with even more inflated salaries/administrative costs/gold plated dorms (because there are less market forces constraining costs when th
When something looks too good to be true.... (Score:3, Interesting)
As I read it, that means that they basically guarantee that you will be making a job that pays $50,000 per year or more within 5 years of graduation or else you don't pay a thing.
So that would mean that if you've got the time to kill to take the course, and you don't have any other promising career prospects at the moment, you have nothing to lose.
Sure, you have to pay off the loan really quickly once you find what would ordinarily be a pretty decent paying job, at 17% of your income, but the amount isn't totally unreasonable, particularly since it's only for a few years.
So where's the catch? This ;literally looks too good to be true.
Heck, that would have been awesome for my comp sci degree because it took me over 5 years after I graduated before I landed my first gainfully employed career connected to my education. It was about another 6 years after that before I was actually making more than $50k per year.
Re:When something looks too good to be true.... (Score:4, Interesting)
So where's the catch? This ;literally looks too good to be true.
At a guess, the catch is that most people won't make it anywhere and so all this has done is waste their time and spoil their credit rating so they can't start a business elsewhere doing something else (they will have to declare this loan). At the same time, the small number of people that do make it are exactly the same ones that would have made it anyway if they had just learnt this stuff at home at zero cost. Now, instead of getting the money, they end up financing everyone else's time wasting.
Re: When something looks too good to be true.... (Score:2)
Re: When something looks too good to be true.... (Score:1)
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As a company, it's easier to just do payday loans.
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If the only criteria for how much you want a job is how much money you will make right now doing it, then the answer is obvious.
In reality, there ought to be other factors.... which job has better long-term prospects? In which job do you feel you'd be a better fit, aligning more closely with your own interests and goals? If the job that pays more such that you'd have to start to pay back the loan right away would otherwise be better for you long term, are you willing to short-change yourself out of a m
Re:When something looks too good to be true.... (Score:5, Informative)
I think you missed the previous story [slashdot.org] about this business. The catch is that the quality of the education is worth less than the time you spend, even if you never pay them a dime.
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If it can somehow get you a job that you want that you otherwise would not have even been able to get your foot in the door, how is that worthless?
And if you could have really done the exact same thing without them, then the stipulation I know that I mentioned of not having any prospects doesn't apply in the first place.
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So where's the catch? This literally looks too good to be true.
The catch is that the school is 100% online and that instructors change every week (according to the last article that appeared on Slashdot).
Now they encourage you to recruit other students and hold study groups with them, but still, $30,000 for a 100% online school is pretty damn expensive.
If you quit the school on the second week, and become a programmer another way, you still owe them all that money.
Re: When something looks too good to be true.... (Score:1)
Re: When something looks too good to be true.... (Score:1)
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Subprime all over again (Score:4, Insightful)
IIRC, A major component of that fiasco was the re-packaging of loans into "tranches" that were fraudulently rated AAA when they were actually full of subprime loans. A good chunk of our debt financed "higher education" system is actually subprime.
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They weren't fraudulently rated AAA. They were rated AAA (or AA, or whatever) according to some really bad metrics. So "exploiting a bug in the rating agencies" than "falsifying documents".
At a higher level, the AAA (or AA, or whatever) ratings held if you assume that foreclosures are truly independent events. There were enough coin flips at known percentages that it may have been reasonable to expect the promised payouts (although even there they may have been a bit overstated.). AAA just refers to li
As shady as Lamda is... (Score:2)
This doesn’t really change Lambda’s incentive structure, unless they expect to go out of business soon. They get a higher value for the ISAs if students are able to pay the money back faster, it just isn’t “real time.”
Holding the ISAs can be pretty capital intensive, even if their programs don’t cost them squat to offer.
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This doesnâ(TM)t really change Lambdaâ(TM)s incentive structure, unless they expect to go out of business soon. They get a higher value for the ISAs if students are able to pay the money back faster, it just isnâ(TM)t âoereal time.â
From what I can read Lamba School was established in 2017, add 9 months of training and 5 years to repay means there's zero data on how many will "default" on their ISAs. My guess is they'll oversell this to investors just as they did to students, act like this is a subprime loan the vast majority will pay back when in reality it's more of junk bond where only a few will manage to land a high enough paying job. When the chickens don't come home to roost until 5-6 years later appearances will be more importa
I do know what part of the Ponzi Pyramid I want to (Score:1)
be on.
And it's not the bottom.
Stop calling it "free"!! (Score:2)
Otherwise, I've got free* candy for you!
_ _ _ _
* Includes mandatory daily deep anal footing assrape, and servitude as a human toilet in my sailor bar.
We're serving asparagus and cuttlefish every wednesday.
A bootcamp will get you a job once (Score:2)
This reminds me of companies selling off mortgages. The trouble is that it increases the pressure to collect the debt and puts the debt collection in the hands of people that might be skilled at using the legal system to
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These are predators going after desperate people who can't find work and have nothing less to lose. We need to nip this in the bud. The best way to do that is tuition free public college. You do not want large numbers of desperate people up to their eyeballs in debt with pseudo degrees. That does not make for a stable country...
I really liked it when the government decided the banks were too big to fail and decided to socialize their losses and spread the cost out among all of the taxpayers. Why do you think it's a good idea to apply this model to an education system that does just as poorly?
There are countries with no, or very-low tuition, but that's not something which is available to everyone. Students who don't do well secondary school don't get the option for free college. There ain't no such thing as a free college educat