In case you haven’t heard, the student debt crisis in the United States is worth $1.5 trillion. Lambda School, a coding education program that students aren’t required to pay for until they get a job, thinks it might have a solution.
As profiled in a recent Wired feature, Lambda School functions on an income-share agreement (ISA) in which students pay nothing while enrolled, then give the school a portion of their earnings once they’re employed. The online program was founded by tech entrepreneur Austen Allred back in 2017, and currently enrolls 2,700 students. The “free until you get a job” conceit can be traced back to Milton Friedman, who proposed the idea in the 1950s, and has attracted attention from supporters as a potential market-based solution to student debt.
The income-sharing model is not without its critics, however. Some have argued that ISAs are designed to maximize financial returns to the school, its venture capital backers and investors. Indeed, as Wired‘s Gregory Barber pointed out, Lambda’s ISA terms do turn out to be steeper than a typical coding program when you run the numbers. While, as Barber noted, a typical coding camp costs about $10,000, Lambda’s post-employment repayment plan caps at $30,000. However, payment obligations end if a student doesn’t have a tech job within five years of graduation.
Critics have also argued that ISA-based education programs like Lambda’s really aren’t all that different from traditional student loans, and may simply deceive students who don’t recognize ISAs as a form of debt. In a letter to Secretary of Education Betsy DeVos, Elizabeth Warren compared ISAs to private student loans, “with the added danger of deceptive rhetoric and marketing that obscure their true nature.”
Despite criticism, including a recent anonymous Twitter thread exposing Lambda’s shortcomings, Allred told Wired he has faith that he can balance the company’s equation — “cost per student, and then the success per student.”
According to Allred, critics want the company to fail “because they want to believe the results we’re producing are impossible,” he told Wired. “We eliminate the excuses people rely on to say why they’re not successful, or why they’re not rich, or why they went down a different path.”
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