For starters there are two types of loans in the system, federal(92%) and private(8%).
Federal is less of a loan, but more a subsidy that you have to repay at later date if you can. There is no market mechanism involved, government sets the terms and rules. Overall if you have your shit together(push paperwork on time), it is nearly impossible to default on that type of a loan. So for all intense and purposes, those loans are just another hidden tax.
The benefits of this system is arguable, but for America where people hate to pay taxes and government needs to put people through college, this is not a bad option.
But... There are two massive problems in the system, private loans and the way colleges charge for education. First a lot of colleges are free to set fees any way they like, as a result in many cases federal loans are not enough and people are forced to take private loans. The problem with private loans, that they are completely market driven(higher, fees, higher costs, depends on your assets etc), but you can't get rid off them via bankruptcy which is absolutely nuts.
Overall the whole system regardless of country is very unfair and regressive in nature(poor people pay more then rich) and represents an example of broken social contract between government and its citizens. As student debt skyrockets, it also impacts the broader economy and forces people to go into debt to pay day to day expenses.
But maybe it is all by design. It is much easier to control people if they are in debt very early on in live vs debt free.
Very on point. We have democracy on a government level and have 1 day in 2 years to select our representatives. For the rest of the time we have to please our boss, that we have not much say about and that has a lot of power about economic circumstances.
Yes, we can always find another boss, but mentally on day to day basis it is not that different to dictatorship.
Lambda School run into the realities of education economics.
As a society, we decided to subsidize high performers so they can actually focus on building/researching things and securitize everyone else.
The fact of the matter is educating high performers is cheaper short term( they teach themselves and process information better) and exponentially more valuable long term (they get good jobs, go into business or lead lucrative fields)
If we sort out people based on similar ratings as applied to bonds, Lambda school works with Cs. It doesn't mean that everyone is bad, it just means on average the level of people is bad. All A people are picked by good unis via scholarships. B people can't get a scholarship but have good enough grades to get into B schools and pay via a loan or via relatives.
Lambda School is focusing on everyone else, but hopefully, there is a lot of everyone else.
The model should have been on looking at Cs and separating good Cs from bad Cs. A good C is normally a student that didn't have opportunities or environment to become A, but have innate ability to do so, given the opportunity and resources.
If you don't really have the tools to distinguished good Cs from bad Cs, you can enroll as many people as possible and hopefully RNG your way to success. The problem with that strategy is that a lot of bad Cs will be unhappy with job outcomes, struggle with courses, generate bad press impacting recruitment, and more importantly be a massive drain on teaching resources.
I still think Lambda School is onto something but trying to do this via hypergrowth focused VC funding is a challenge.
On another topic, the hack I use in recruiting people who didn't have the opportunity to learn CS is to ask them to do CS50 in their own time. About 90% of people never come back, about 5% start but never finish or take too long to finish, and about 5% knock it out of the park. Those 5% generally were always worth my time advising and if we were lucky working with them. It doesn't mean they will become rockstar programmers, but it means they have learning ability and with enough time and resources will become a net positive to the company in a variety of engineering and engineering adjacent roles.
Just got this e-mail in my inbox. Just replaced my company name.
Subject: What's Beta's post-COVID plan?
Hey Tima,
Looked into Beta today--pretty cool what you're doing.
As a remote accelerator, we've had a spike in applications recently from startups forced to go remote because of the quarantine, and much of our investor network is still investing.
We’re interested in what you’re building, and since many companies are gearing up for the post-pandemic economy I thought Beta would be a good fit for our accelerator.
Just to give you a quick run down:
-We run several cohorts per year for startups in the Pre-Seed, Seed, & Series A stages, investing up to $250k into the top companies.
-We've helped companies raise over $150m+ in funding.
-We help companies with marketing, fundraising, growth-hacking, and even exit plans in our curriculum and 1-on-1 advising.
-Our program includes free resources like Foundersuite, AWS credits, Microsoft Azure, etc.
-We've always been a remote accelerator well before recent events--our entire program is designed around connecting founders with mentors and investors remotely.
P.S. We’ve been working 24/7 reviewing investments for our cohort companies from our demo day, but feel free to message me if you have any questions (might take me a day or two to respond but I will!)
For startes I do run a business, but it is irrelevant. To understand how economy works, algebra is enough.
There is nothing wrong with government providing liquidity by purchasing corporate debt and replacing lost cashflows.
A lot of corporation are so leveraged, that if they can't get the new loans to pay principles on old loans, they are in big trouble. They constantly refinancing every few years.
Market conditions are so uncertain right now, that investors don't want any of that and would like to sit on the sidelines or charge crazy interest rates.
As a result Fed stepped in and said that they are happy to participate in the market to make sure the interest rate stay low and companies have access to capital.
EXAMPLE:
Corp borrows 100 dollars to build a factory at 5% annual interest to be repaid back a year later.
Corp builds a factory and makes 7 dollars that year profit.
In the end of the year they have 2 dollars in their account ( 7 minus 5 interest). So how they supposed to pay back 100 they borrowed?
They just go borrow another 100 , pay it back to early investors and cycle repeats. This business is generating 2% return to shareholders and 5% to bond holders. Sucks to be a shareholder in this, but they are in the green.
Obviously it is way more complicated in real life but it is exactly the same principle. Access and cost to capital is what businesses needs to survive. Here is example of Tesla doing it -> https://edition.cnn.com/2020/01/31/investing/tesla-cash-crun....
The moral here is that Fed willingly just creates money out of the thing air, totally realizing that they might never get it back. If those loans blow up, they just write it off and add to the national debt for future generations to pay.
If corporation goes bankrupt, nobody is chasing CEOs to pay back their multimillion salaries funded by taxpayes. It is just cost of doing business and I am fine with it.
Can we just extend same courtesy to the rest of the citizens. As the great American philosopher said: "Corporations are people my friend"
Support is very linear in nature. More issues you have, more people you need to take in feedback and act on it. For early companies with very MVP products, support can just kill them, because they will spend all day long doing support stuff vs building. By definition their products are going to be bad.
On top of that reporting issue is just 1% of work, because you actually need someone to go and reproduce that issue. If it is a feature request, then it is another massive chunk of work to spec it and even decide to do it or not to do it.
Also when you post it in the forum, it is way easier to get back to and companies will ask to login support tickets with production accout details, so they can actually go back into the logs and match that data.
Bad customers provide value early on, because they basically do free QA.
Also early there is not enough data to know who are the bad customers or who customers who are having real problems, they all look the same.
The best way to deal with them is just to be honest: "This is not on our roadmap, yes we know issues exists. Here is link to issues forum"
Public issues forum helps a lot, because if issue doesn't have upvotes or comments, they can reason that chances for developers getting to it is nearly zero.
Especially for anything below non pure enterprise 100k+ per customer, there is no way team can address even 2% of issues if there is even hint of PMF.
Even for massive companies like Atlassian and Unity there are public feature requests that have thousands of upvotes and they just don't do them because it is not on the roadmap.