Business

Lambda School’s For-Profit Plan to Solve Student Debt

Allred, who is 29, started what would become Lambda School in 2017. He was living in Utah, where he had grown up in a Mormon family, and had returned after stepping away from his first Silicon Valley startup, a crowdsourcing site where users report and fact-check the news. (At the time, a San Francisco magazine feature chronicled the young entrepreneur’s time living out of his 2002 Honda Civic.) Back at home, he cowrote a “growth hacking guide,” titled Secret Sauce, with tips for drumming up excitement about your business on Twitter and Instagram.

Lambda School began as a short coding course (the name refers to a concept within the original subject, functional programming). Allred didn’t have a background in teaching, but he was interested in “creating opportunity,” he says. Earlier in life, he’d dropped out of Brigham Young after deciding he wasn’t getting bang for his buck, and had later watched his friends struggle with student debt. So Lambda, Allred decided, would be free. And he saw how the crowded coding school industry, popular with career switchers after the 2008 recession, was increasingly struggling to sign up students with up-front fees.

Allred was not the first to alight upon the benefits of an income-sharing model. ISAs have been tested at other coding schools and even a few traditional colleges—most notably Purdue, which began a pilot in 2016. They remain a tiny fraction of the $1.5 trillion student debt market, perhaps worth $200 million, and there’s little data yet to analyze how they pan out for students. Nonetheless, the idea is growing—largely due to Lambda School, which observers say represents more than half of the ISA market.

Like most coding schools, Lambda’s curriculum is unaccredited and self-reports its performance metrics. (State regulations vary for online schools; Lambda was fined $75,000 in March for failing to register with California’s regulator—the result, Allred says, of poor legal advice. Its application is now pending.) The idea is to welcome beginners and career switchers alike. At nine months, the program is longer than the norm and includes a section on basic computer science concepts. Everyone follows the same course progression, regardless of initial coding ability, but the video structure allows students to repeat coursework if needed.

When you do the math, the ISA terms are steeper than your typical $10,000 coding camp. Once you make at least $50,000 a year working in technology, you pay 17 percent of your income. (That’s a minimum of $708 per month.) The total is capped at $30,000, or after 24 months of payments. However, even if you still don’t have a tech job five years after graduation, your payment obligations end.

Many students graduate happy with the arrangement. Chris Atoki, a 23-year-old from New Jersey, was a few months into a community college program in electrical engineering when he realized he didn’t have a taste for hardware. He ended up in sales at Mattress Firm. After seeing an ad for Lambda School on Facebook, he joined one of the earliest classes, in 2017, and began watching lectures from the mattress store over an iPhone Wi-Fi hotspot. Learning to code was challenging, he says, but ultimately as transformative as advertised. He decided to stay on as a teaching assistant after graduation—an opportunity to refresh himself on the coursework before entering the job market—and later joined a company in Philadelphia as a developer.

Atoki says his new income, roughly $95,000, puts him on track to pay the full $30,000—far more than he would have likely paid to attend a competitor. He deposits his income in a bank account monitored by a company called Leif, which administers Lambda’s ISAs, and arranges for $1,345 to be withdrawn each month. That’s more than typical rent in most US cities, but Atoki says he doesn’t mind, since he’s making about three times as much as he did selling mattresses.

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