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

Posted by msmash on 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.

9 of 472 comments (clear)

  1. With Apologies to Rick and Morty by Anonymous Coward · · Score: 5, Insightful

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

    That just sounds like slavery with extra steps.

    1. Re:With Apologies to Rick and Morty by Anonymous Coward · · Score: 5, Interesting

      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.

    2. Re:With Apologies to Rick and Morty by lgw · · Score: 5, Interesting

      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.

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    3. Re: With Apologies to Rick and Morty by Bengie · · Score: 5, Insightful

      From the holistic view, it changes who holds the most risk. Instead of school getting paid no matter what, they most likely only get paid and get paid the most if they create decent employees.

    4. Re: With Apologies to Rick and Morty by Anonymous Coward · · Score: 5, Insightful

      So I guess the basket weaving degrees will go away right? Since if they really are useless not enough of their graduates would end up playing back.

      Second: those that do better than average will pay way more than they would otherwise since they have to cover the cost of all the people that got the degrees but were unfortunate.

      Next: what happens if you fail to graduate? You're partial degree doesn't get you better pay from Walmart but your 2 yrs in school cost real dollars. Deferring paying makes any idiot that can get in take a shot at it unless you make them pay the full amount when they drop out ... a very expensive pay after delivery idea.

      Lastly: they are offering half year programs in nursing and cyber security: what jobs are available for people in either of those fields with highschool + 6mths worth of education? I could be wrong (it happens) but that sounds silly to me. Nursing is a regulated profession in most places, cyber security maybe more of the wild west but if I'm hiring someone to come in I want them to know more than the IT guys I already have which to me means more education than them not 1/8th albeit highly focused.

  2. Already exists in some countries by ark1 · · Score: 5, Insightful

    It is called - taxes.

    1. Re:Already exists in some countries by foghelmut · · Score: 5, Insightful

      Because education is a net benefit to society.

  3. An online bootcamp by any other name.... by Anonymous Coward · · Score: 5, Informative

    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.

  4. I wonder where they dreamt up this idea by Computershack · · Score: 5, Informative

    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...

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