Why income share agreements did not work out(twitter.com)
twitter.com
Why income share agreements did not work out
https://twitter.com/seanlinehan/status/1505923007096700939
326 comments
If anyone's interested, I'm a bootcamp grad with a current ISA. The ISA I currently have:
EDIT: To clarify, zero interest means zero interest. The 150% is the terms of the ISA agreement. You pay 10% of your paychecks to them until it's either been 5 years or you've payed 150% of the principle amount. Most people that get jobs in tech will have paid the 150% before the 5 year mark
*pros*:
- zero interest
- whatever hasn't been paid after 5 years, I don't owe
- no payments are due if you don't have a job making over $50k
*cons*:
- tuition was definitely overpriced and you end up having to pay 150% of the principal loan (assuming you have a high enough paying job for long enough within those 5 years)
- a lot of bureaucracy you have to go through to prove you don't have >$50k salary
EDIT: To clarify, zero interest means zero interest. The 150% is the terms of the ISA agreement. You pay 10% of your paychecks to them until it's either been 5 years or you've payed 150% of the principle amount. Most people that get jobs in tech will have paid the 150% before the 5 year mark
- zero interest
- {snip} you end up having to pay 150% of the principal loan (assuming you have a high enough paying job for long enough within those 5 years)
It doesn't really behave like interest though: the amount paid doesn't depend on compounding or your repayment schedule.
That it doesn't compound doesn't mean it's not interest.
That just means it's not compound interest.
That just means it's not compound interest.
It’s a fee, not interest. Interest is charged over time (either compounded or uncompounded, either way you pay more interest if you take longer to pay off the loan). Here they’re charging a onetime 50% fee.
I think the point here is that "zero interest" isn't particularly compelling when the cost of credit is being driven up (to exorbitant levels) by another mechanism. An equivalent loan with a 5-year term would have an interest rate of almost 18% and in this case you don't have the option to save money through early repayment.
Debit is not just big digit, it is an ever deepening well. There are many people that have paid ten of thousand of dollars of their student loans and still saw the total due amount increase.
A loan with a very reasonable 5% overall interest if paid on time can have unbounded interest if paid late enough.
The student dept crisis is dominated by the latter kind of situations.
(still yes, it is zero compound interest + 50% fixed interest)
A loan with a very reasonable 5% overall interest if paid on time can have unbounded interest if paid late enough.
The student dept crisis is dominated by the latter kind of situations.
(still yes, it is zero compound interest + 50% fixed interest)
> There are many people that have paid ten of thousand of dollars of their student loans and still saw the total due amount increase.
The problem is a lack of financial literacy education on one side and a lack of career options for decent-paying jobs on the other side - a lot of office jobs these days require college degrees, and not everyone can work in the trades or join the military.
Personally, I believe that all of this is actually designed the way it is to make money for the banks handing out student loans.
The problem is a lack of financial literacy education on one side and a lack of career options for decent-paying jobs on the other side - a lot of office jobs these days require college degrees, and not everyone can work in the trades or join the military.
Personally, I believe that all of this is actually designed the way it is to make money for the banks handing out student loans.
To be pendatic, the fee is just interest that is compounded exactly once.
Instantaneously on contract creation and irrespective of loan term / repayment / etc.
It's such a non-standard contract that the terms loan and interest are kinda fuzzy
It's such a non-standard contract that the terms loan and interest are kinda fuzzy
> That just means it's not compound interest.
that's not true. simple interest is calculated on the remaining principal, thus it does continue to accrue with time (which this "zero interest 50%" does not)
compound interest means interest calculated on the remaining principal and on accrued interest.
https://www.investopedia.com/ask/answers/042315/what-differe...
that's not true. simple interest is calculated on the remaining principal, thus it does continue to accrue with time (which this "zero interest 50%" does not)
compound interest means interest calculated on the remaining principal and on accrued interest.
https://www.investopedia.com/ask/answers/042315/what-differe...
Important distinction to make, most people just think "more money means interest" but the mechanics of the two financial instruments differ and this is the entire selling point for these ISAs, and the reason why one may be a good / bad idea in a situation.
> - tuition was definitely overpriced
IMO, this is the essence of why ISAs have become so scammy.
ISA-based bootcamps are doing a fantastic job of competing against the perceived cost of a college education. We've all seen news headlines about how private college tuition is reaching $200K. What most people miss is that almost nobody pays full price for college. They have a high headline number for the wealthiest families, but virtually everyone else pays a fraction of this cost or some times nothing at all.
People see the "$30K" price tag for Lambda School and other programs and assume it's a steal, yet most in-state tuitions are in the same range and provide substantially more education.
I've also been completely stunned by how bad some of these programs are. I took the bait about Lambda School back when PG was promoting it all over Twitter, but it has been a terrible disappointment for the small handful of bright students I've known who went through it. Maybe it's changed, but at the time it felt like they were paying $30K of future earnings to have an inexperienced person point them to simple tutorials that they could have found by themselves online. They were basically paying for the certificate that said they completed the program, which is ironically the stereotype that people were using for 4-year colleges at the time.
IMO, this is the essence of why ISAs have become so scammy.
ISA-based bootcamps are doing a fantastic job of competing against the perceived cost of a college education. We've all seen news headlines about how private college tuition is reaching $200K. What most people miss is that almost nobody pays full price for college. They have a high headline number for the wealthiest families, but virtually everyone else pays a fraction of this cost or some times nothing at all.
People see the "$30K" price tag for Lambda School and other programs and assume it's a steal, yet most in-state tuitions are in the same range and provide substantially more education.
I've also been completely stunned by how bad some of these programs are. I took the bait about Lambda School back when PG was promoting it all over Twitter, but it has been a terrible disappointment for the small handful of bright students I've known who went through it. Maybe it's changed, but at the time it felt like they were paying $30K of future earnings to have an inexperienced person point them to simple tutorials that they could have found by themselves online. They were basically paying for the certificate that said they completed the program, which is ironically the stereotype that people were using for 4-year colleges at the time.
> People see the "$30K" price tag for Lambda School and other programs and assume it's a steal, yet most in-state tuitions are in the same range and provide substantially more education.
on the other hand, the time cost of a bachelor's in CS is much higher than that of an 8 month (?) bootcamp. four years is a long time to spend treading water wrt employable skills.
I do feel that the degree is better long-term if it's at all possible. but that's not realistic for everyone. if at the end of the bootcamp you get a decent job that you wouldn't have otherwise, that seems like a good deal. if not, you're out a lot less money and time than flunking out of undergrad halfway through.
on the other hand, the time cost of a bachelor's in CS is much higher than that of an 8 month (?) bootcamp. four years is a long time to spend treading water wrt employable skills.
I do feel that the degree is better long-term if it's at all possible. but that's not realistic for everyone. if at the end of the bootcamp you get a decent job that you wouldn't have otherwise, that seems like a good deal. if not, you're out a lot less money and time than flunking out of undergrad halfway through.
> four years is a long time to spend treading water wrt employable skills.
Only if your sole goal in life is the pursuit of money. Most of the people I know enjoyed their time at university, they got to learn in a structured manner about philosophy and other interesting topics while having freedom to indulge in intellectual curiosity. Life isn't a race to get on a career path.
I do agree that flunking out is probably the worst outcome though, so if academia isn't for you don't feel pressured to pursue it - it certainly won't make any difference in terms of your job prospects by the time you're 30 as a developer. We just need to stop treating university as a vocational training session.
Only if your sole goal in life is the pursuit of money. Most of the people I know enjoyed their time at university, they got to learn in a structured manner about philosophy and other interesting topics while having freedom to indulge in intellectual curiosity. Life isn't a race to get on a career path.
I do agree that flunking out is probably the worst outcome though, so if academia isn't for you don't feel pressured to pursue it - it certainly won't make any difference in terms of your job prospects by the time you're 30 as a developer. We just need to stop treating university as a vocational training session.
> We just need to stop treating university as a vocational training session.
Is it treated as a vocational training session? I thought university was more about signaling some combination of socioeconomic status and ability to learn/motivation. More selective schools and more difficult coursework (such as hard sciences or engineering) signal a potential employee who is able to learn and manipulate the system they are put in, as well as possibly bringing useful connections.
Is it treated as a vocational training session? I thought university was more about signaling some combination of socioeconomic status and ability to learn/motivation. More selective schools and more difficult coursework (such as hard sciences or engineering) signal a potential employee who is able to learn and manipulate the system they are put in, as well as possibly bringing useful connections.
People joining boot camps are often later in life than your typical college student and time is at a greater premium.
> Life isn't a race to get on a career path.
Presumably life isn't a race at all, which makes you wonder why everyone is in such a rush to attend university when they are young and don't yet have the resources to pay for it. It will be still be there when you are older and the pursuit of knowledge will still be every bit as enjoyable. It may be even more enjoyable as you then have the life experience to appreciate it. Retirement is meant for these types of hobbies.
Presumably life isn't a race at all, which makes you wonder why everyone is in such a rush to attend university when they are young and don't yet have the resources to pay for it. It will be still be there when you are older and the pursuit of knowledge will still be every bit as enjoyable. It may be even more enjoyable as you then have the life experience to appreciate it. Retirement is meant for these types of hobbies.
> Presumably life isn't a race at all, which makes you wonder why everyone is in such a rush to attend university when they are young
It’s the networking opportunities (i.e. “the college experience”) which suffer as the age gap grows between you and the other students. Since networking is the bulk of the value of university, your age during attendance is of disproportionate consequence. I’m speaking from personal experience here — going into a post-grad program, it was immediately obvious to me that the age gap would act as an all but uncrossable chasm. And I’ve seen this chasm in action in undergrad, where it was even more pronounced.
Simply put, university is a lot harder to justify when a significant age gap exists. To your point, maybe most people should wait a few years before attending university, but they don’t, and those who’d otherwise prefer to wait before starting university — which is doubtlessly a wise move for some — have to risk their college experience to do so.
It’s the networking opportunities (i.e. “the college experience”) which suffer as the age gap grows between you and the other students. Since networking is the bulk of the value of university, your age during attendance is of disproportionate consequence. I’m speaking from personal experience here — going into a post-grad program, it was immediately obvious to me that the age gap would act as an all but uncrossable chasm. And I’ve seen this chasm in action in undergrad, where it was even more pronounced.
Simply put, university is a lot harder to justify when a significant age gap exists. To your point, maybe most people should wait a few years before attending university, but they don’t, and those who’d otherwise prefer to wait before starting university — which is doubtlessly a wise move for some — have to risk their college experience to do so.
> It’s the networking opportunities
The move to taking university online, and the masses of students following, through the COVID period suggests not. Online university does not provide any unique networking opportunities that aren't already available through every other online service, HN included.
The move to taking university online, and the masses of students following, through the COVID period suggests not. Online university does not provide any unique networking opportunities that aren't already available through every other online service, HN included.
I don't want to spend my whole life waiting for a retirement that might never come - I might die, my mental faculties might degrade, even if everything went right I might still burn out.
If I thought I could take a three- or four-year break to study in my thirties or forties without it hurting my career I absolutely would. But employers seem to be suspicious of that kind of thing (unless it's something like a 1-year MBA). So if I want a sabbatical without hurting my earnings too much, a college degree seems like my best option.
If I thought I could take a three- or four-year break to study in my thirties or forties without it hurting my career I absolutely would. But employers seem to be suspicious of that kind of thing (unless it's something like a 1-year MBA). So if I want a sabbatical without hurting my earnings too much, a college degree seems like my best option.
> four years is a long time to spend treading water wrt employable skills
Internships during school can be a massive salary increase for many people. Even 25+$/hour is quite a large pay bump for a large chunk of the population, and many internships go well past that.
Internships during school can be a massive salary increase for many people. Even 25+$/hour is quite a large pay bump for a large chunk of the population, and many internships go well past that.
good point. getting an internship for summer and maybe fall/spring part time is a good way to defray the opportunity cost of not having a full-time job for four years. I think you have to be a pretty strong student and well organized to get an internship before junior year though.
> What most people miss is that almost nobody pays full price for college. They have a high headline number for the wealthiest families, but virtually everyone else pays a fraction of this cost or some times nothing at all.
You're using this statement to claim that college is not actually expensive but I'm pretty sure it supports the opposite claim. Anecdotally, I was accepted into a range of universities and ended up picking ~ the worst one because that was the university which gave me the best scholarships.
If college is extremely expensive then it makes perfect sense that the only people paying full price are the people who have a lot of money: everybody else is filtered out by the high price.
You're using this statement to claim that college is not actually expensive but I'm pretty sure it supports the opposite claim. Anecdotally, I was accepted into a range of universities and ended up picking ~ the worst one because that was the university which gave me the best scholarships.
If college is extremely expensive then it makes perfect sense that the only people paying full price are the people who have a lot of money: everybody else is filtered out by the high price.
I totally agree. A lot of people talk about ISA being scams and I basically agree. But I don't think it's a scam in how they assume. If you do your research most ISA agreements are good about being more straightforward than most other types of loans. The scam is usually solely in the principle amount being charged.
That being said, I think ISAs are actually partially successful in that they provided a way for someone broke like me to try something and not have to worry too much about the impact if it doesn't end up succeeding. I wish people in my position had more negotiating power to avoid being overcharged, but that's not a problem unique to ISAs
That being said, I think ISAs are actually partially successful in that they provided a way for someone broke like me to try something and not have to worry too much about the impact if it doesn't end up succeeding. I wish people in my position had more negotiating power to avoid being overcharged, but that's not a problem unique to ISAs
To put it another way, it’s a high risk loan from the perspective of the ISA lender — which they offset with a high premium to get around the adverse selection are problem. It’s basically a mirror image of the problem that insurance providers face.
To be clear, this essentially means if I go through this program and end up working at McDonalds for 5 years, all I have to pay is through the labor of bureaucracy
They removed the "you must get a job in software" clause of their ISAs. A general manager at McDonalds in California makes $58k a year. So if you think you will work your way to manager within five years, you can expect to pay them a cut of your salary.
Only if the program doesn't teach you the meaning of the term "opportunity cost"
The unqualified word "pay" is universally understood among English speaker not to include opportunity cost. When someone asks "how much did you pay for that big Mac", people answer "$3", not "$3 plus twenty minutes to walk there and five minutes in the store"
What if you go to a bootcamp, get saddled with an ISA and then work at mcdonalds and somehow get a better job that has nothing to do with the bootcamp? The bootcamp gets your money. Quantity over quality.
Contrast that with a private loan for tuition.
You pay if you have no job, or any job. Debt has no expiration and is not disc arable in bankruptcy.
It is clear that ISAs are worse if you will be successful. It is also clear that traditional loans are worse if you are wildly unsuccessful.
The tradeoff is the tricky part.
You pay if you have no job, or any job. Debt has no expiration and is not disc arable in bankruptcy.
It is clear that ISAs are worse if you will be successful. It is also clear that traditional loans are worse if you are wildly unsuccessful.
The tradeoff is the tricky part.
Debt does generally have an expiration and is discardable in bankruptcy... unless you live in America. ISAs might be an attractive alternative to how terrible American laws about student debt are, but the real solution is to fix the awful laws.
A better alternative that you can pursue today is just to seek education abroad, Canadian universities are a fraction of the cost for an equivalent service - or be careful about the education you choose, most state colleges are very reasonable for in-state tuition and you can potentially save on room and board.
Ivy-league schools are overpriced and a waste of money.
A better alternative that you can pursue today is just to seek education abroad, Canadian universities are a fraction of the cost for an equivalent service - or be careful about the education you choose, most state colleges are very reasonable for in-state tuition and you can potentially save on room and board.
Ivy-league schools are overpriced and a waste of money.
If we are talking about higher education in general, the US also has a plethora of affordable colleges.
In California, tuition at community colleges is $1,300/year and $5,700/yr for state colleges.
Even the expensive Universities of California are 14k/year.
The real costs are room, board, and entertainment. For example, a shared dormitory room and food plan is easily 20k/year
In California, tuition at community colleges is $1,300/year and $5,700/yr for state colleges.
Even the expensive Universities of California are 14k/year.
The real costs are room, board, and entertainment. For example, a shared dormitory room and food plan is easily 20k/year
> Debt does generally have an expiration and is discardable in bankruptcy... unless you live in America.
If we start with other countries, there will be many other catches. Such as personal bankruptcy not being a concept at all in many jurisdictions.
If we start with other countries, there will be many other catches. Such as personal bankruptcy not being a concept at all in many jurisdictions.
[deleted]
Only around 10% of total loans disbursements are private.
I don't know about other ISAs, but with Lambda school the job had to be related to your bootcamp learning for you to owe them money.
> get a better job that has nothing to do with the bootcamp
I'll take it.
I'll take it.
I don't understand, how do you end paying 150% of the principal loan if it's zero interest?
Presumably they mean that the total amount paid is not affected by the timing of payments. If they make a lot of money and pay it all off the first year, they pay the same total number of dollars as if they are unemployed for 4 years and make enough to pay everything off the 5th year. It's something like 50% financing fees, but 0% interest, and forgiveness after 5 years.
You can either spend $20k up front for the bootcamp, or pay $30k as part of an ISA over 5 years.
That just sounds like interest with extra steps.
actually its interest with the least amount of steps. Amount due isn't variable and no compounding.
It is a static markup but not interest, as interest varies with time and is dynamic. This is a markup regardless of time.
Non compounding interest? I think there is a better word for this.
Still has a time component, though. A flat 50% that is due whether you pay it off in 1 month or 60 months is a fee, not interest.
The term is “fee”. It’s a 50% lending fee.
see edit. The major difference is you don't have to worry about one of the most common debt traps: getting stuck paying only the interest. The amount you have to pay is totally fixed. 150% of the principle is the most you'd have to pay assuming you've had a high enough paying job for long enough within that 5 year span after graduating (most people do)
It's not interest, it's... hey, look, something behind you!
See https://en.wikipedia.org/wiki/Contractum_trinius . There are lots of ways to slice and dice cash flows and quibble over what's interest and what isn't. (See also repurchase agreements, Islamic finance, general structured finance, etc. etc.) It's generally more useful to compare cash flows in terms of yield-to-maturity, instead of strictly by interest rate.
> I don't understand, how do you end paying 150% of the principal loan if it's zero interest?
That extra 50% is a once-off fee.
A high fee, to be sure, and one that is deferred, but a fee nonetheless.
That extra 50% is a once-off fee.
A high fee, to be sure, and one that is deferred, but a fee nonetheless.
Because it’s an income share agreement, so whether you land a job making $100k or $51k you still owe 10% of your income to this company for 5 years. Regardless of the amount actually “borrowed”. And I’m guessing there is a cap at 150% of the “loan”. So if you land a high paying job rt off the bat you could end up paying a lot more than you borrowed.
-> tuition was definitely overpriced + having to pay 150% of the principal loan
So the actual interest is like 100%? Though it's fixed over a 5 year period, so that turns to around 30% yearly interest rate. Hardly zero.
-> Most people that get jobs in tech will have paid the 150% before the 5 year mark
That's even higher interest for these people. But I guess it's an incentive for the program to get people good jobs.
So the actual interest is like 100%? Though it's fixed over a 5 year period, so that turns to around 30% yearly interest rate. Hardly zero.
-> Most people that get jobs in tech will have paid the 150% before the 5 year mark
That's even higher interest for these people. But I guess it's an incentive for the program to get people good jobs.
That's not 30% unless you repay real quick, if you paid it at the end of 5 years in a single payment that's 8.5%, 1.085^5 = 1.50.
In straight amortization using $30k tuition, $45k repayment, over 60 months is $750/mo which works out to 17.25% rate.
It isn't a great deal but it's not terrible vs. other low recourse private loan options.
In straight amortization using $30k tuition, $45k repayment, over 60 months is $750/mo which works out to 17.25% rate.
It isn't a great deal but it's not terrible vs. other low recourse private loan options.
You can call it "zero interest" if you want, but, if you're paying back 150% of principal over 5 years, that's a 19% APY.
https://www.calculator.net/loan-calculator.html?cloanamount=...
https://www.calculator.net/loan-calculator.html?cloanamount=...
To clarify, you can either pay the principal amount (e.g. 20k) or use the ISA which maxes out at 150% of the principle amount. By "zero interest" I just mean it's a fixed amount that won't ever change. This might seem like a frivolous distinction, but it means that you'll never have to worry about getting trapped paying just the interest so I think it makes a big difference
It’s not helpful to calculate APY that way. After all, if they had made the maximum repayment period 50 years instead of 5 years that would result in a lower APY according to your calculation.
In reality the APY will be heavily dependent and on your income (as a high income will result in repayment period less than 5 years, while a low income will result in only partial repayment by the end of the 5 years).
In reality the APY will be heavily dependent and on your income (as a high income will result in repayment period less than 5 years, while a low income will result in only partial repayment by the end of the 5 years).
[deleted]
Interesting. What kind of bureaucracy?
>It's basically an extremely high interest loan,
Yeah, because there's adverse selection going on: "But people with high credit scores tend to have better, cheaper options than ISAs". All the academically successful student can get student loans/scholarships to traditional 4 year programs, so you're left with people who are genuinely bad mixed with diamonds in the rough. Because of this, you have to charge more to make up for the bad application pool. I'm not sure why this is worth complaining about. It's like complaining that lawyers who work on contingency overcharge compared to ones that work by hourly.
>A good compromise here would be to make private loans fully forgivable
So basically turn them into unsecured loans with sky high interest rates?
Yeah, because there's adverse selection going on: "But people with high credit scores tend to have better, cheaper options than ISAs". All the academically successful student can get student loans/scholarships to traditional 4 year programs, so you're left with people who are genuinely bad mixed with diamonds in the rough. Because of this, you have to charge more to make up for the bad application pool. I'm not sure why this is worth complaining about. It's like complaining that lawyers who work on contingency overcharge compared to ones that work by hourly.
>A good compromise here would be to make private loans fully forgivable
So basically turn them into unsecured loans with sky high interest rates?
Do you have any idea the issues that would solve?
Warning: US centric post below.
If you could file bankruptcy on private student loans, education costs would plummet overnight. Before you claim that education quality will go down, MOST of the money for both private and public colleges/universities ends up somewhere else beyond education. Football stadiums, expensive ad campaigns, fancy buildings, large marketing departments, even political lobbying. Kill off untouchable private loans and place restrictions on public loans then you will see money flow in the right direction.
ISAs are foolish, regardless, because you don't need a degree to write code or manage infrastructure. My income was near $400,000 last year, and I not only didn't go to college, I dropped out of high school due to being homeless. In either W2 or contractual work, I've NEVER had a company question why I did not have a college degree. I understand some folks need the structure, and I think those folks need to be protected. For non engineering jobs or more structured jobs, ISAs are borderline criminal. For everyone else? Unless you like throwing away money that you don't have, stay away.
Warning: US centric post below.
If you could file bankruptcy on private student loans, education costs would plummet overnight. Before you claim that education quality will go down, MOST of the money for both private and public colleges/universities ends up somewhere else beyond education. Football stadiums, expensive ad campaigns, fancy buildings, large marketing departments, even political lobbying. Kill off untouchable private loans and place restrictions on public loans then you will see money flow in the right direction.
ISAs are foolish, regardless, because you don't need a degree to write code or manage infrastructure. My income was near $400,000 last year, and I not only didn't go to college, I dropped out of high school due to being homeless. In either W2 or contractual work, I've NEVER had a company question why I did not have a college degree. I understand some folks need the structure, and I think those folks need to be protected. For non engineering jobs or more structured jobs, ISAs are borderline criminal. For everyone else? Unless you like throwing away money that you don't have, stay away.
> ”there's no reason you can't just tell people to take a free class off YouTube, and then have them pay $500 or so to have a project graded”
I think there is a reason you can’t do that. People won’t learn to program with that. I do not defend Lambda School anymore, but I think you are oversimplifying things to make your point. Which, for me, has the opposite effect of thinking less of your point when you oversimplify like that.
I think there is a reason you can’t do that. People won’t learn to program with that. I do not defend Lambda School anymore, but I think you are oversimplifying things to make your point. Which, for me, has the opposite effect of thinking less of your point when you oversimplify like that.
As far as I'm concerned, that's more than enough to at least give someone an interview
If they can complete a difficult project, and get though a whiteboard interview, why not hire them as a junior developer.
Just because someone paid 30k for a boot camp doesn't mean they can code.
If they can complete a difficult project, and get though a whiteboard interview, why not hire them as a junior developer.
Just because someone paid 30k for a boot camp doesn't mean they can code.
I think the issue being criticized isn't about credentials, which smart companies don't care much about already, but about ability to learn. Your oversimplification of equivalent education being to just watch a free series of videos and get graded on a project has the same flavor as just telling people to teach themselves.
I mean, learning on your own is certainly a thing, especially in our field. My own beginnings were self-taught from a book. But structured environments are important, too, and for many people the only chance they'll have of learning something, because they can't or won't otherwise. Does the "cost" (which we're calling a flat $X as if it were paid upfront, ignoring the ISA details) have to be so high for these bootcamps? Probably not, but if you're going to attempt to replicate something like a structured experience, your costs aren't going to be nothing. But that's beside the point, since in the style of "charge more" advice from startup founders, if you're trying to build a business, your cost is what the market lets you get away with, not what some randos on the internet not in your target customer base think is "fair".
I mean, learning on your own is certainly a thing, especially in our field. My own beginnings were self-taught from a book. But structured environments are important, too, and for many people the only chance they'll have of learning something, because they can't or won't otherwise. Does the "cost" (which we're calling a flat $X as if it were paid upfront, ignoring the ISA details) have to be so high for these bootcamps? Probably not, but if you're going to attempt to replicate something like a structured experience, your costs aren't going to be nothing. But that's beside the point, since in the style of "charge more" advice from startup founders, if you're trying to build a business, your cost is what the market lets you get away with, not what some randos on the internet not in your target customer base think is "fair".
>has the same flavor as just telling people to teach themselves
Worked for me.
Noting bad happens if you open up VS code and write bad Python. I wanted to make games with my friends, subsequently I learned enough to get an entry level job.
What about the Odin project, that's free. Coursera is very inexpensive.
I'd advise at least trying that before blowing 30k. Particularly if these bootcamps are fudging placement numbers.
Worked for me.
Noting bad happens if you open up VS code and write bad Python. I wanted to make games with my friends, subsequently I learned enough to get an entry level job.
What about the Odin project, that's free. Coursera is very inexpensive.
I'd advise at least trying that before blowing 30k. Particularly if these bootcamps are fudging placement numbers.
I agree, it happens, and it's a good idea for people to at least dip their toes in the seemingly infinite free or low cost resources out there to gauge things before spending very much money. (Again ignoring that the whole premise of these ISAs is that you don't spend money except under some reasonable "win" conditions.) But lots of people don't do that. Lots of people can't, even, though with some structure some of them can learn and be as or even more competent than those who took a mostly self-taught immediate-goal route, or self-taught-with-formal-supplementation. Seeing how little pre-college programming experience matters vs. coming in with no programming knowledge is an interesting lesson of doing college. Learning programming is actually complicated, what works for you is not going to work for everyone.
> Seeing how little pre-college programming experience matters vs. coming in with no programming knowledge is an interesting lesson of doing college.
Wait what do you mean by this? I started programming in 6th grade (after begging my dad for a month to spend $50 on a Java textbook) and so the CS portions of college was incredibly easy. When I didn't understand algorithms I just implemented them and learned by doing (and I instantly understood how they could be applied to past projects). I would show up to classes only on the midterm and final days because it was such a headstart. I mostly focused on the humanities because there's nothing the computer science department could teach me that I couldn't teach myself online.
Wait what do you mean by this? I started programming in 6th grade (after begging my dad for a month to spend $50 on a Java textbook) and so the CS portions of college was incredibly easy. When I didn't understand algorithms I just implemented them and learned by doing (and I instantly understood how they could be applied to past projects). I would show up to classes only on the midterm and final days because it was such a headstart. I mostly focused on the humanities because there's nothing the computer science department could teach me that I couldn't teach myself online.
I'm saying on average such experience tends to wash out, at least among those who graduate, though I saw it in individuals by sophomore year. You have two groups, one with some level of pre-college experience, and the other without (not even a HS programming class, though those with basically just that but not any personal learning are an interesting middle ground with parallels to 9-5 employee types that treat programming as just a job). Both groups have those who find the material easy overall (though the second will likely attend lectures; but these days the first too because attendance is mandatory at many places) and both groups have those who struggle on some things and must work and as a side-effect improve their general learning-to-learn abilities. (My own experience was a mix of both depending on the class despite having a general head start where I began in 8th grade with a book and a website dream.) By the end you'll see similar distributions with respect to measures like grades or time-to-complete-assignment or job placement and success, the starting buffs wash out.
Admittedly my sampling is unscientific, and I'm willing to believe pre-college experience can help avoid some of the culling that happens, and it was especially useful to me to land a mostly part time job that wasn't an internship. I also may be biased by my choice of school where most my data comes from (though talking to coworkers and interns from various other schools at my job after college contributed) because my school was a lot more hard-core in terms of course load and especially in later years project focus -- the number of required CS courses typically exceeded other schools known for good CS programs like, say, Stanford, with 5 or 6 overall courses per semester rather than a more common 3-4, unless you did it in 5 years instead of 4.
Admittedly my sampling is unscientific, and I'm willing to believe pre-college experience can help avoid some of the culling that happens, and it was especially useful to me to land a mostly part time job that wasn't an internship. I also may be biased by my choice of school where most my data comes from (though talking to coworkers and interns from various other schools at my job after college contributed) because my school was a lot more hard-core in terms of course load and especially in later years project focus -- the number of required CS courses typically exceeded other schools known for good CS programs like, say, Stanford, with 5 or 6 overall courses per semester rather than a more common 3-4, unless you did it in 5 years instead of 4.
> As far as I'm concerned, that's more than enough to at least give someone an interview
Are you a person who interviews? If not your opinion is of little weight. If you do hire people I’m sure if you advertise your policy you’ll get lots of people who will be happy to try their luck.
Are you a person who interviews? If not your opinion is of little weight. If you do hire people I’m sure if you advertise your policy you’ll get lots of people who will be happy to try their luck.
I think the issue is that there is demand for a reputable (hirable) $3,000-30,000 program which can teach you to program in less time and/or more flexible schedule than traditional university.
I think one good solution is Western Governor’s University which falls in that price range and is extremely flexible on timeline.
But honestly there are a lot of students who want high quality intensive instruction but cannot attend a top-10/20 university. It’s very very hard for most people to find high quality learning outside of those programs unless you get extremely lucky to be in the Bay Area or at a company which can provide an environment full of experts to learn from.
I think one good solution is Western Governor’s University which falls in that price range and is extremely flexible on timeline.
But honestly there are a lot of students who want high quality intensive instruction but cannot attend a top-10/20 university. It’s very very hard for most people to find high quality learning outside of those programs unless you get extremely lucky to be in the Bay Area or at a company which can provide an environment full of experts to learn from.
Not only did Lambda School crash and burn (Bloom Tech Institute rebrand = LOL). But those of us who managed to not give up and actually learn in other ways... are still on the hook for that ISA repayment. What a monumental scam.
Since apparently it's not connected to credit score, what stops you from just not paying it?
If small claims court is genuinely their only recourse, that sounds like something I might try my odds in, especially if I have a compelling case that I've been screwed.
If small claims court is genuinely their only recourse, that sounds like something I might try my odds in, especially if I have a compelling case that I've been screwed.
[deleted]
Maybe all we need for education is a room and a minimum wage employee making sure we are actually studying. After all, education happens in the students head, not the teachers.
I'm just thinking out loud. Lambda school obviously failed to deliver on its promise but what if we can deliver the same service for very little money?
I'm just thinking out loud. Lambda school obviously failed to deliver on its promise but what if we can deliver the same service for very little money?
I never fully understood why students would go to a bottom tier law school and take out 200K in loans, when you very well know the value of a bottom tier law school. I mean, today is not the lack of information age. You can pretty much find out all the data points needed about a school. For instance, bottom tier schools typically don't advertise the graduating salaries or employment data. Just this one data point is an indicator of future earnings potential.
That being said, top law schools or top schools for that matter are within reach for low income individuals as long as they clear the entry criteria.This entry criteria is a whole another debate but Lambda and other schools also have an entry criteria.
There are need based scholarships and I think Stanford/MIT/Berkeley offer free tuition if your parents earn less than 100K per annum or something like that. So opportunity is definitely there but then not everyone can make it to Stanford, yes but that doesn't mean you saddle yourself with a huge debt by going to a lower tier school, knowing that your loan repayment capacity will be very low in the initial years of post graduation employment.
That being said, top law schools or top schools for that matter are within reach for low income individuals as long as they clear the entry criteria.This entry criteria is a whole another debate but Lambda and other schools also have an entry criteria.
There are need based scholarships and I think Stanford/MIT/Berkeley offer free tuition if your parents earn less than 100K per annum or something like that. So opportunity is definitely there but then not everyone can make it to Stanford, yes but that doesn't mean you saddle yourself with a huge debt by going to a lower tier school, knowing that your loan repayment capacity will be very low in the initial years of post graduation employment.
> when you very well know the value of a bottom tier law school. I mean, today is not the lack of information age. You can pretty much find out all the data points needed about a school. For instance, bottom tier schools typically don't advertise the graduating salaries or employment data. Just this one data point is an indicator of future earnings potential.
You're thinking about this from a very different set of life experiences. Not everyone knows to look for things like that. Not everyone even realises that there are different tiers of law schools. If no-one in your neighbourhood has ever met a lawyer socially, why would you?
You're thinking about this from a very different set of life experiences. Not everyone knows to look for things like that. Not everyone even realises that there are different tiers of law schools. If no-one in your neighbourhood has ever met a lawyer socially, why would you?
But people do have an understanding that some schools are better than others. That's why Harvard has prestige and is well known even in those neighborhoods and some random school doesn't.
They might have an understanding that Harvard is something famous. They probably don't know that that translates into earning a whole lot more. I certainly didn't.
I'm not following. Afaik Lambda didn't collapse. It recently rebranded due to a trademark conflict, but they're still alive and well from what I gather. Someone be so kind to explain?
There's nothing to follow - most of the comments here are wrong.
ISAs align incentives between teaching institutions and students, they're strictly better than the tuition model. They don't fix all issues because they still require selectivity on admissions (since the school needs to students to succeed in order to survive).
ISAs are also not guaranteed to be good, but the ones originally used by Lambda School were good (Lambda School is somewhat of a third rail topic on HN, so it's worth just considering the terms).
- Only require repayment if students gets a software job making >50k.
- Payment was bounded to 10yr or 30k whatever happens first.
Compare to college tuition which charges huge sums of money often paid for by non-defaultable loans and schools don't really care if students ever get employed by anyone.
From his tweet thread conclusion:
1. Consumers are confused by ISAs
2. And when they take the deal, they often behave poorly
3. And when they behave poorly, you don't have great recourse
4. And there's a looming regulatory threat
5. And the financial markets aren't supportive
My takeaway from this is that it's harder to build an incentive aligned business that really gets students to succeed than it is to take their money as tuition and not have to worry about that so much for business building. I guess I'd argue no shit - that's why ISAs are better, they force the companies to be good at getting positive student outcomes because it's an existential risk if they don't.
That's kind of the entire point.
ISAs align incentives between teaching institutions and students, they're strictly better than the tuition model. They don't fix all issues because they still require selectivity on admissions (since the school needs to students to succeed in order to survive).
ISAs are also not guaranteed to be good, but the ones originally used by Lambda School were good (Lambda School is somewhat of a third rail topic on HN, so it's worth just considering the terms).
- Only require repayment if students gets a software job making >50k.
- Payment was bounded to 10yr or 30k whatever happens first.
Compare to college tuition which charges huge sums of money often paid for by non-defaultable loans and schools don't really care if students ever get employed by anyone.
From his tweet thread conclusion:
1. Consumers are confused by ISAs
2. And when they take the deal, they often behave poorly
3. And when they behave poorly, you don't have great recourse
4. And there's a looming regulatory threat
5. And the financial markets aren't supportive
My takeaway from this is that it's harder to build an incentive aligned business that really gets students to succeed than it is to take their money as tuition and not have to worry about that so much for business building. I guess I'd argue no shit - that's why ISAs are better, they force the companies to be good at getting positive student outcomes because it's an existential risk if they don't.
That's kind of the entire point.
> ISAs align incentives between teaching institutions and students, they're strictly better than the tuition model.
Well, there's two ways you could operate an ISA:
1. You invest $20k in each student, carefully selecting only the applicants who are most likely to succeed, and giving them the most impactful, high-ROI courses you can, so that they almost all repay at least $20k
2. You invest $500 in each student using prerecorded video classes and assignments graded by unpaid 'mentors', take on far more students, and every time you luck into a student who repays $30k that's pure profit, baby.
Well, there's two ways you could operate an ISA:
1. You invest $20k in each student, carefully selecting only the applicants who are most likely to succeed, and giving them the most impactful, high-ROI courses you can, so that they almost all repay at least $20k
2. You invest $500 in each student using prerecorded video classes and assignments graded by unpaid 'mentors', take on far more students, and every time you luck into a student who repays $30k that's pure profit, baby.
Compare to the tuition equivalents:
1. Invest $20k in each student, etc.
2. Invest $500 in each student, and get paid $20k in pure profit right away, baby.
So while the ISA model doesn't prevent scammers, I have no counterargument to "they're strictly better than the tuition model".
1. Invest $20k in each student, etc.
2. Invest $500 in each student, and get paid $20k in pure profit right away, baby.
So while the ISA model doesn't prevent scammers, I have no counterargument to "they're strictly better than the tuition model".
You missed a third way which I think is actually most likely, given recent monetary stimulus policies:
3. You invest $500 in each student using prerecorded video classes and assignments graded by unpaid 'mentors', take on far more students, then structure groups of ISAs together into ISA-backed bonds, which you then sell to pension funds and other institutional investors for 15% off par value, or $25.5k each.
Not only do you get paid up front, but whether or not the ISAs eventually get paid back is no longer your problem. Also now instead of recruiting and vetting 200 teachers to teach your 2000 students, you recruit 10 teachers and a couple experienced sell-side traders and analysts.
3. You invest $500 in each student using prerecorded video classes and assignments graded by unpaid 'mentors', take on far more students, then structure groups of ISAs together into ISA-backed bonds, which you then sell to pension funds and other institutional investors for 15% off par value, or $25.5k each.
Not only do you get paid up front, but whether or not the ISAs eventually get paid back is no longer your problem. Also now instead of recruiting and vetting 200 teachers to teach your 2000 students, you recruit 10 teachers and a couple experienced sell-side traders and analysts.
To be fair, the original post was complaining that he couldn't find suckers to sell the loans to ^W^W^W "there are not mature capital markets for ISA programs to tap".
This is true and one of the initial criticisms of "there's not necessarily incentive alignment here" I thought of when I first encountered the idea. Hearing about #2 happen in reality is also sad. Though I think over longer periods more competition and reputation trashing has a chance to correct some of #2. Nevertheless I think "University" of Phoenix is still operating and hoovering up tax payer money despite being an internet punching bag for years, so...
"ISAs align incentives between teaching institutions and students, they're strictly better than the tuition model."
That's very, very hand-wavey. I'm in broad agreement with you that, at this moment in time, ISAs are probably better than tuition for most people, however, they are an immature financial instrument (relative to traditional tuition loans) and so little effort has been into extracting as much profit from them as possible... but that doesn't mean it's not possible, nor does it mean that it won't happen, and it certainly doesn't mean that there is some inherent alignment between ISA institutions and students.
All the positives about ISAs could have been said about student loans a few decades ago! That's before even challenging the assumption that higher student income is best for all parties involved: if a student discovers that actually, their new career is miserable, there is suddenly a huge incentive mismatch.
That's very, very hand-wavey. I'm in broad agreement with you that, at this moment in time, ISAs are probably better than tuition for most people, however, they are an immature financial instrument (relative to traditional tuition loans) and so little effort has been into extracting as much profit from them as possible... but that doesn't mean it's not possible, nor does it mean that it won't happen, and it certainly doesn't mean that there is some inherent alignment between ISA institutions and students.
All the positives about ISAs could have been said about student loans a few decades ago! That's before even challenging the assumption that higher student income is best for all parties involved: if a student discovers that actually, their new career is miserable, there is suddenly a huge incentive mismatch.
Lambda’s ISAs are not incentive aligned for most students. Let’s say the income threshold is 50k.
They are not incentive aligned for students who make between 0-50k. Lambda gets no money.
They’re extremely unaligned for students making a little over 50k. The student takes home drastically less money because they hit the threshold.
They’re aligned for students making some narrow range above 50k.
But once you go above that range they are no longer aligned because lambda is capped out.
They are not incentive aligned with most students, incentivizing Lambda to act against the interests of most students, which they have.
They are not incentive aligned for students who make between 0-50k. Lambda gets no money.
They’re extremely unaligned for students making a little over 50k. The student takes home drastically less money because they hit the threshold.
They’re aligned for students making some narrow range above 50k.
But once you go above that range they are no longer aligned because lambda is capped out.
They are not incentive aligned with most students, incentivizing Lambda to act against the interests of most students, which they have.
> "They are not incentive aligned for students who make between 0-50k. Lambda gets no money."
The are aligned because <50k is a failure for lambda. They're aligned because they need students to make >50k.
> "They’re extremely unaligned for students making a little over 50k. The student takes home drastically less money because they hit the threshold."
The point of lambda school is to get people decent jobs when they didn't have any good options prior to that. A little over 50k where 14% of salary is paid back is the worst case, but probably still better than before. Definitely better than >50k of debt and no job from tuition costs.
> "But once you go above that range they are no longer aligned because lambda is capped out."
Good student returns funnel more students into the program. If you can succeed with this at scale it's a big deal. If they can actually teach people to dev vs. just selling a credential there are even more ways to build on this.
The are aligned because <50k is a failure for lambda. They're aligned because they need students to make >50k.
> "They’re extremely unaligned for students making a little over 50k. The student takes home drastically less money because they hit the threshold."
The point of lambda school is to get people decent jobs when they didn't have any good options prior to that. A little over 50k where 14% of salary is paid back is the worst case, but probably still better than before. Definitely better than >50k of debt and no job from tuition costs.
> "But once you go above that range they are no longer aligned because lambda is capped out."
Good student returns funnel more students into the program. If you can succeed with this at scale it's a big deal. If they can actually teach people to dev vs. just selling a credential there are even more ways to build on this.
The ISAs are being sold to investors. It's in the interest of the teaching company to set the price as high as possible and minimize program spend, not as low as possible with maximum program spend (which is what the student wants).
Lambda School leaked documents show poor performance over the last two years
https://news.ycombinator.com/item?id=28989092
Lambda School agrees to end deceptive educational financing practices https://news.ycombinator.com/item?id=26946972
Lambda School agrees to end deceptive educational financing practices https://news.ycombinator.com/item?id=26946972
I don't think the problem is that it is a loan. The real problem is that you can manipulate people to sign up for the ISA and then give a low cost bad quality service. If you scale this up high enough, there are going to be people whose income is going to increase above the threshold just through chance alone. If you provide some low quality MOOC that costs you very little per person then you basically get to take a share of someone's income without providing any value.
If the institution was accredited and there were inspections and punishments to keep quality above a certain threshold the model might work but right now it basically invites companies to operate like scammers.
If the institution was accredited and there were inspections and punishments to keep quality above a certain threshold the model might work but right now it basically invites companies to operate like scammers.
[deleted]
Federal student loans are a major driver behind increases in college tuition costs (1). Like you say, debt isn't necessarily bad - but there's a strong argument that subsidized debt and the lack of risk in granting loans just gives a bigger pool money for institutions to take from.
Point being, federal loans are not a good deal. Each dollar you borrow effectively increases your tuition by 60 cents.
(1) https://www.newyorkfed.org/medialibrary/media/research/staff...
Point being, federal loans are not a good deal. Each dollar you borrow effectively increases your tuition by 60 cents.
(1) https://www.newyorkfed.org/medialibrary/media/research/staff...
"2. And when they take the deal, they often behave poorly 3. And when they behave poorly, you don't have great recourse"
Yes. As it turns out when you invest in people with no skill, background or money - your investment goes to zero (excluding outliers). For companies like ycombinator the outliers are everything. But in this horrendous business model they can't capture the outliers' profits without being exploitative.
If you honestly sat me down for 4 hours I couldn't think of a worse idea. Uber for cats? Rating people with a general global score? Selling loans to people out of rehab. I can't do it.
First 15 minutes you learn in any loan business is: Income, Debt-to-income Ratio, Collateral. If those are out the window - you are either better than a trillion dollar loan system - or completely insane.
Yes. As it turns out when you invest in people with no skill, background or money - your investment goes to zero (excluding outliers). For companies like ycombinator the outliers are everything. But in this horrendous business model they can't capture the outliers' profits without being exploitative.
If you honestly sat me down for 4 hours I couldn't think of a worse idea. Uber for cats? Rating people with a general global score? Selling loans to people out of rehab. I can't do it.
First 15 minutes you learn in any loan business is: Income, Debt-to-income Ratio, Collateral. If those are out the window - you are either better than a trillion dollar loan system - or completely insane.
I think we’re between a rock and a hard place. We can’t tighten the student loan spigot. We have held out college as the route to upward mobility for everyone, especially Black people and immigrants, and the demographics of the people who will be excluded from tightening student loans will make it politically toxic.
In view of that I see no alternatives to price controls. Any school that takes federal student loans can charge no more than $X,000 annually. I hate price controls but I don’t see the alternative in a market where government policies otherwise both goose demand and limit supply.
In view of that I see no alternatives to price controls. Any school that takes federal student loans can charge no more than $X,000 annually. I hate price controls but I don’t see the alternative in a market where government policies otherwise both goose demand and limit supply.
Price controls are being tried out in the UK and it doesn't work - every institution charges the maximum, so it's no longer a ceiling but simply the price everyone pays annually to go to university (£9,250 at the moment).
What about the alternative to ISAs proposed by OP?
Better than an ISA is an income-dependent loan with some minimum amount that must be paid back regardless of the program outcome.
With this setup:
1. You concede and comply with the existing regulation
2. You get access to the existing capital markets so financing costs come down
3. You can use credit reports as a way to enforce the contract so collection rates go up
4. Consumers already understand debt
And, most importantly, the consumer gets a better deal than a classical loan.
Similarly a bad idea relative to plain old federal loans?
Better than an ISA is an income-dependent loan with some minimum amount that must be paid back regardless of the program outcome.
With this setup:
1. You concede and comply with the existing regulation
2. You get access to the existing capital markets so financing costs come down
3. You can use credit reports as a way to enforce the contract so collection rates go up
4. Consumers already understand debt
And, most importantly, the consumer gets a better deal than a classical loan.
Similarly a bad idea relative to plain old federal loans?
Federal student loans already have income-based repayment options, along with forbearances and public-service loan forgiveness options.
I don't see how this proposal is a better deal.
I don't see how this proposal is a better deal.
It’s basically a proposal to do the same thing for private loans. Unlike the federal government, the originator of a private loan will care about repayment rates, thus somewhat aligning incentives.
> 40k in student loan debt, which is about the max you can take out federally for undergrad, isn't bad.
The max for undergrad federal loans is $57,500.
The max for undergrad federal loans is $57,500.
That’s the overall max, but the increasing yearly limits mean you can’t reach that unless you take more than 4 years.
If you finish in 4 years, the max is about $45k
If you finish in 4 years, the max is about $45k
> Lambda school, which fortunately also collapsed was notorious for this.
This statement seems to be going unchallenged. It wouldn't surprise me, but if you check @BloomTech and @Austen on twitter, you can see they're still talking it up: https://twitter.com/BloomTech https://twitter.com/Austen
This statement seems to be going unchallenged. It wouldn't surprise me, but if you check @BloomTech and @Austen on twitter, you can see they're still talking it up: https://twitter.com/BloomTech https://twitter.com/Austen
The rebranded Lambda School still offers ISAs:
https://www.bloomtech.com/tuition/income-share-agreements
So they didn't go away and Lambda didn't completely collapse.
The outcome based loans aren't better, they don't have a payment cap and don't expire if you get a job offer above $50,000 a year.
I wonder if they offer every graduate a teachin' position.
https://www.bloomtech.com/tuition/income-share-agreements
So they didn't go away and Lambda didn't completely collapse.
The outcome based loans aren't better, they don't have a payment cap and don't expire if you get a job offer above $50,000 a year.
I wonder if they offer every graduate a teachin' position.
I learned from your comment that Lambda School fell apart a couple months ago. And I'm a pretty regular HN reader. Pretty interesting in the context of the founder being super active on social media. The denouement is always quieter I guess.
Rebranded (to avoid getting sued for using someone else’s trademark)
https://www.bloomtech.com/
> The online coding school that invests in you
> Train remotely to become a software engineer or data scientist and pay nothing upfront until you are earning $50k or more
https://www.bloomtech.com/
> The online coding school that invests in you
> Train remotely to become a software engineer or data scientist and pay nothing upfront until you are earning $50k or more
I think they just rebranded.
"Regulatory arb" makes it sound like they did some clever financial engineering to conjure money out of this air. It actually means they were able to skirt regulations meant to put a limit on the interest rates that borrowers pay.
I think everyone in finance knows "regulatory arb" is the polite term for "we found a legal loophole".
If it weren’t for private loans, it would have been impossible for me to go to college.
Did Lambda fold or just rebrand?
The thread admits that savvy financial consumers have better options:
> Second, credit scores were the most predictive variable of good participant behavior for us. But people with high credit scores tend to have better, cheaper options than ISAs.
And then claims that the simplicity of the instrument makes them a better option than debt ("simplicity" isn't a virtue if the alternative is middle school pre-algebra levels of "complicated" and comes at much lower prices):
> Furterhmore [sic], consumers were consistently confused by ISAs and had a vague sense they were exploitative. I think ISAs are less complicated than debt, but consumers don't have experience with then.
His TL;DR has borderline misleading levels of... interpretation. The real story is that ISAs are exploitative and most consumers -- ESPECIALLY the ones who might actually do okay in life -- can't be "educated" out of seeing that an obvious raw deal is an obvious raw deal. So you're left exploiting the folks everyone else considers too risky, who, it turns out, are... too risky.
Like... he says so himself, in so many words.
> Second, credit scores were the most predictive variable of good participant behavior for us. But people with high credit scores tend to have better, cheaper options than ISAs.
And then claims that the simplicity of the instrument makes them a better option than debt ("simplicity" isn't a virtue if the alternative is middle school pre-algebra levels of "complicated" and comes at much lower prices):
> Furterhmore [sic], consumers were consistently confused by ISAs and had a vague sense they were exploitative. I think ISAs are less complicated than debt, but consumers don't have experience with then.
His TL;DR has borderline misleading levels of... interpretation. The real story is that ISAs are exploitative and most consumers -- ESPECIALLY the ones who might actually do okay in life -- can't be "educated" out of seeing that an obvious raw deal is an obvious raw deal. So you're left exploiting the folks everyone else considers too risky, who, it turns out, are... too risky.
Like... he says so himself, in so many words.
ISA, from a high level perspective, is a private, capitalistic institution, trying to prove that taxes makes both parties come out on top.
For the past 6 years, I've operated a software engineering school[1] that uses ISAs and I have some thoughts about them. There are two main stated benefits to using ISAs (there are others, but those seem overblown):
To the second bullet, the major problem of deferring all payments, however, is that you attract a lot of people looking for a shortcut. This is exactly the opposite attribute top employers are looking for. This is the "adverse selection problem" Sean mentioned.
Ultimately, the solution here is in selecting for the right type of students into the ISA-based program. Sean mentions that credit scores track with the type of students they're looking for. Other ISA-based programs have stated that they've found a secret sauce other than credit scores for detecting the right students.
We've found a different selection criteria:
We ask students to do a lot of work before we engage them with an ISA. I'm calling this model the ISA-later model, just so we can contrast this with an ISA-first model, which is what Sean and everyone else is doing.
An ISA-later program solves nearly all the problems associated with an ISA-first approach:
[1] launchschool.com
a) commission based pricing (aka, incentive alignment pricing)
b) deferred payment
To the second bullet, the major problem of deferring all payments, however, is that you attract a lot of people looking for a shortcut. This is exactly the opposite attribute top employers are looking for. This is the "adverse selection problem" Sean mentioned.
Ultimately, the solution here is in selecting for the right type of students into the ISA-based program. Sean mentions that credit scores track with the type of students they're looking for. Other ISA-based programs have stated that they've found a secret sauce other than credit scores for detecting the right students.
We've found a different selection criteria:
We ask students to do a lot of work before we engage them with an ISA. I'm calling this model the ISA-later model, just so we can contrast this with an ISA-first model, which is what Sean and everyone else is doing.
An ISA-later program solves nearly all the problems associated with an ISA-first approach:
- adverse selection is mitigated since you have a long track record of student behavior and performance
- can still be egalitarian, without relying on credit scores or degrees or any socioeconomic markers
- still possible to defer all payments, without the lock-in of an ISA-frst approach
[1] launchschool.com
https://launchschool.com/deferred#cite-note-3
> Once students graduate from Capstone, they are expected to spend 40 hours a week Monday through Friday searching for a software engineering career. Weekly check ins are mandatory.
I don't think I could handle a 9-5 job, let alone 8 hours a day applying to jobs under penalty of unspecified legal consequences.
> Once students graduate from Capstone, they are expected to spend 40 hours a week Monday through Friday searching for a software engineering career. Weekly check ins are mandatory.
I don't think I could handle a 9-5 job, let alone 8 hours a day applying to jobs under penalty of unspecified legal consequences.
It's rarely 8 hours a day "applying to jobs". This is similar to an employer saying "you should work 40 hours/week". In that 40 hours are lots of varied activity, including breaks and lunch and any other activity that will allow you to succeed.
The idea is that we want to set expectation that people should focus on searching for a job and not, say, go on vacation. The wording here also is far more severe than reality only because we want serious participants.
The idea is that we want to set expectation that people should focus on searching for a job and not, say, go on vacation. The wording here also is far more severe than reality only because we want serious participants.
Huh—I did this program (I didn’t know the founder posted here, just browsing) and I had no idea weekly check-ins were mandatory. For serious (but not fanatic) participants it is, of course, a no-brainer to check in at least that often. Just found that line interesting and wanted to share.
Hey Adam! This is the weekly check-ins during your job hunt we did. I guess your job hunt duration was too short, so maybe you didn't do too much of this :)
My daughter did an ISA for a six month digital marketing bootcamp. Terms were a capped ($40K total payback) 1/2 of income over $40K for 5 years, 0% interest.
On one hand, the total payback would be $40K for six months of school. That is really high even for a top-tier college.
On the other had, she has ended up going from $30K/year to about $50k/year and is paying $5000 per year towards her ISA. So her income went up by $20K and she's keeping $15k of it. That's a pretty big win - so six months of school, increase in net income of 50%. Not bad.
So where's the real problem? For every person like my daughter, there are lots of people who spend six months, and end up not making enough money to pay back the ISA. There's a lot more to improving your income than going to school. Everything from grooming habits to interpersonal skills to punctuality. The school was taking on immense risk of getting no money from many of the students.
On one hand, the total payback would be $40K for six months of school. That is really high even for a top-tier college.
On the other had, she has ended up going from $30K/year to about $50k/year and is paying $5000 per year towards her ISA. So her income went up by $20K and she's keeping $15k of it. That's a pretty big win - so six months of school, increase in net income of 50%. Not bad.
So where's the real problem? For every person like my daughter, there are lots of people who spend six months, and end up not making enough money to pay back the ISA. There's a lot more to improving your income than going to school. Everything from grooming habits to interpersonal skills to punctuality. The school was taking on immense risk of getting no money from many of the students.
> On the other had, she has ended up going from $30K/year to about $50k/year and is paying $5000 per year towards her ISA. So her income went up by $20K and she's keeping $15k of it. That's a pretty big win - so six months of school, increase in net income of 50%. Not bad.
That's 50% increase in gross income, not net income.
That's 50% increase in gross income, not net income.
Minor nit $20k is the gross income so $15K is the net. $15k is 50% of $30k.
No. $20k is the gross income. Then you deduct ISA payment $5k and you get to $15k. Then you deduct taxes and you get to X. X is the net income. X is lower than $15k. Therefore, the net income does not increase by 50% in this example. The net income increases much less than 50%.
> So where's the real problem? For every person like my daughter, there are lots of people who spend six months, and end up not making enough money to pay back the ISA.
Isn't that a feature, not a problem? The education institution has a strong incentive to actually improve the earning potential of its graduates. This is in contrast to institutions that get paid upfront, which have no such incentive. Once you've forked over the tuition they're getting paid regardless of how well its graduates do in the workplace.
I think the learning here is that institutions offering ISAs need to be more selective with enrollment.
Isn't that a feature, not a problem? The education institution has a strong incentive to actually improve the earning potential of its graduates. This is in contrast to institutions that get paid upfront, which have no such incentive. Once you've forked over the tuition they're getting paid regardless of how well its graduates do in the workplace.
I think the learning here is that institutions offering ISAs need to be more selective with enrollment.
> On one hand, the total payback would be $40K for six months of school. That is really high even for a top-tier college.
For reference, my wife worked at a restaurant during undergrad, stayed with her parents, and didn't have much scholarship money. She paid about $40K ($30K in loans, $10K in money from her restaurant and tutoring gigs. We paid off the loans with signing bonuses before they accrued any interest). Again, for FOUR YEARS of education at a full university. Why does that matter? Well, she had three majors in three very different subjects, any one of which enables a lucrative career and the combination of which makes her extraordinarily valuable.
Sorry if this comes off as rude, but I can't even begin to imagine thinking that $40K for 6 months of instruction in white collar commodity labor is a good deal.
For reference, my wife worked at a restaurant during undergrad, stayed with her parents, and didn't have much scholarship money. She paid about $40K ($30K in loans, $10K in money from her restaurant and tutoring gigs. We paid off the loans with signing bonuses before they accrued any interest). Again, for FOUR YEARS of education at a full university. Why does that matter? Well, she had three majors in three very different subjects, any one of which enables a lucrative career and the combination of which makes her extraordinarily valuable.
Sorry if this comes off as rude, but I can't even begin to imagine thinking that $40K for 6 months of instruction in white collar commodity labor is a good deal.
Years of life taken goes in the cost column, not the benefit column. You should probably include the market value of four years' rent in the costs too even if you were getting it for "free".
And yeah, bragging about how cool your triple-major wife is while sneering at those of us from a lower class background where making it to "white collar commodity" is a big step up is pretty damn rude.
And yeah, bragging about how cool your triple-major wife is while sneering at those of us from a lower class background where making it to "white collar commodity" is a big step up is pretty damn rude.
> Years of life taken goes in the cost column
She wasn't in suspended animation for four years. She received four years of a valuable service.
> us from a lower class background
She grew up in a single parent household, was the first person in her family to receive a college degree, and paid rent (actually, started helping with household expenses in high school).
She wasn't in suspended animation for four years. She received four years of a valuable service.
> us from a lower class background
She grew up in a single parent household, was the first person in her family to receive a college degree, and paid rent (actually, started helping with household expenses in high school).
> She wasn't in suspended animation for four years. She received four years of a valuable service.
So if the same degree had taken eight years, would that make it more valuable? You're still talking about delaying her life for those years.
I don't know enough to comment about how much different course providers are teaching, but if they really were managing to teach you the same things as a four-year degree in six months, that would surely make it more valuable, not less.
So if the same degree had taken eight years, would that make it more valuable? You're still talking about delaying her life for those years.
I don't know enough to comment about how much different course providers are teaching, but if they really were managing to teach you the same things as a four-year degree in six months, that would surely make it more valuable, not less.
> So if the same degree had taken eight years
The time value of money is powerful, but specialization in unique intersections of skills entails earning power. The place where that intersection lies on a graph will be different for each person and some of it comes down to luck.
Do PhDs generally have positive expected value? Not really. Deep learning PhDs 10 years ago? Ask a retired 30 something.
In her case, 8 years would probably still have been worth it, from a purely monetary perspective, even assuming disciplined saving and excellent returns on savings during those first 7.5 years.
You're still talking about delaying her life for those years.
In what sense? She worked. She played. She loved. She got progressively better paying and opportunity-creating part-time jobs (aka internships). She learned. Etc.
There's a lot of negative things you can say about college, but "delaying life" definitely isn't one of them if you're doing things right.
I don't know enough to comment about how much different course providers are teaching, but if they really were managing to teach you the same things as a four-year degree in six months, that would surely make it more valuable, not less.
If you only get out of 4 years of education what you could have learned in 6 months, then yes. And I have no doubt that happens.
But if I could choose between e.g. $30K for a high quality CS+Bio+Finance BS or $30K for a high quality 6 month program in one of those, the choice is sort of obvious for me. The opportunity cost of the 3 years is more than worth the amortized increase in specialization (== earning potential) and risk mitigation over a 30+ year career.
The time value of money is powerful, but specialization in unique intersections of skills entails earning power. The place where that intersection lies on a graph will be different for each person and some of it comes down to luck.
Do PhDs generally have positive expected value? Not really. Deep learning PhDs 10 years ago? Ask a retired 30 something.
In her case, 8 years would probably still have been worth it, from a purely monetary perspective, even assuming disciplined saving and excellent returns on savings during those first 7.5 years.
You're still talking about delaying her life for those years.
In what sense? She worked. She played. She loved. She got progressively better paying and opportunity-creating part-time jobs (aka internships). She learned. Etc.
There's a lot of negative things you can say about college, but "delaying life" definitely isn't one of them if you're doing things right.
I don't know enough to comment about how much different course providers are teaching, but if they really were managing to teach you the same things as a four-year degree in six months, that would surely make it more valuable, not less.
If you only get out of 4 years of education what you could have learned in 6 months, then yes. And I have no doubt that happens.
But if I could choose between e.g. $30K for a high quality CS+Bio+Finance BS or $30K for a high quality 6 month program in one of those, the choice is sort of obvious for me. The opportunity cost of the 3 years is more than worth the amortized increase in specialization (== earning potential) and risk mitigation over a 30+ year career.
You should be proud of your wife.
I'm proud if what my daughter achieved in so little time.
Time will tell how things work out for both.
I'm proud if what my daughter achieved in so little time.
Time will tell how things work out for both.
Her taxes likely went up by $2400 or so (plus whatever the state income tax on $20000 incremental is) and she paid $5K to the ISA.
So, seems like she kept around $12.5K of the $20K (less if she’s in a state that taxes income), which is an improvement to her life, but is less than +50% increase in her pocket.
So, seems like she kept around $12.5K of the $20K (less if she’s in a state that taxes income), which is an improvement to her life, but is less than +50% increase in her pocket.
Yeah, I remember reading about these when they launched and on paper they seemed like such a bad deal. The only group of people who would benefit from them over traditional loans are people who know they would never be able to pay off the equivalent debt.
> credit scores were the most predictive variable of good participant behavior for us.
Unrelated, an insurance adjuster once told me that, given two people of the same age buying the same car, credit score is the number one determinant which one will be more likely to get into an accident. Luckily (or unluckily, depending on your position) most states make it illegal for determining insurance premiums.
> credit scores were the most predictive variable of good participant behavior for us.
Unrelated, an insurance adjuster once told me that, given two people of the same age buying the same car, credit score is the number one determinant which one will be more likely to get into an accident. Luckily (or unluckily, depending on your position) most states make it illegal for determining insurance premiums.
credit score is the number one determinant which one will be more likely to get into an accident
I'd like to know how that differs from just plain income? The more money you make, the easier it is to keep clean credit. But it also gives you more control over driving to let you be a safer driver.
Overnight snowfall made the roads slippery? An office worker can go in late, or just work from home for the day, but the low paid service worker has to go in or he doesn't get paid (or might even lose his job).
Feeling sick today? Office worker can just call in sick, the service worker doesn't have many (or any) sick days, so he drinks half a bottle of cough medicine and drives to work anyway.
Going out for a drink after work? Well paid worker can take an Uber home, or get a hotel room in the city, an option that the low paid worker doesn't have since even if he took Uber home, his car is parked on the street and is going to get ticketed or towed.
Running late for work? Office worker can call in to the meeting or reschedule his morning meeting (and just shrug and say "traffic" when he shows up late), low paid worker is going to get his pay docked or lose his entire shift for being 5 minutes late so he's gotta drive fast to make it.
I'd like to know how that differs from just plain income? The more money you make, the easier it is to keep clean credit. But it also gives you more control over driving to let you be a safer driver.
Overnight snowfall made the roads slippery? An office worker can go in late, or just work from home for the day, but the low paid service worker has to go in or he doesn't get paid (or might even lose his job).
Feeling sick today? Office worker can just call in sick, the service worker doesn't have many (or any) sick days, so he drinks half a bottle of cough medicine and drives to work anyway.
Going out for a drink after work? Well paid worker can take an Uber home, or get a hotel room in the city, an option that the low paid worker doesn't have since even if he took Uber home, his car is parked on the street and is going to get ticketed or towed.
Running late for work? Office worker can call in to the meeting or reschedule his morning meeting (and just shrug and say "traffic" when he shows up late), low paid worker is going to get his pay docked or lose his entire shift for being 5 minutes late so he's gotta drive fast to make it.
Is there any actual evidence that what you're saying is the reason for the difference though? It's incorrect that credit scores are highly correlated with income [0].
Most accidents are caused by things that are pretty ordinary forms of irresponsibility [1]. A credit score is a (flawed) measure of financial responsibility. That seems like a much more reasonable, although less narratively satisfying, connection.
[0] https://www.federalreserve.gov/econres/notes/feds-notes/are-...
Most accidents are caused by things that are pretty ordinary forms of irresponsibility [1]. A credit score is a (flawed) measure of financial responsibility. That seems like a much more reasonable, although less narratively satisfying, connection.
[0] https://www.federalreserve.gov/econres/notes/feds-notes/are-...
We find a low correlation between credit score levels and income, with the correlation coefficient around 0.27 for income levels and 0.29 for log income.
Driving too fast for conditions or in excess of posted limit or racing 8,746 17.2%
Under the influence of alcohol, drugs, or medication 5,164 10.1
Failure to yield right of way 3,728 7.3
Failure to keep in proper lane 3,381 6.6
Operating vehicle in a careless manner 3,302 6.5
Distracted (phone, talking, eating, object, etc.) 3,008 5.9> Most accidents are caused by things that are pretty ordinary forms of irresponsibility
This is a big diversion form the actual point, but it's important. The vast majority of these crashes (the word "accident" is rarely used by news/DOTs/etc anymore) could be prevented by designing streets to control speed and improve visibility. So I'd argue that they're caused by poor design which comes as a result of misplaced societal values.
Re the second item in that list of causes, an interesting article came out a couple days ago: https://www.bloomberg.com/news/articles/2022-03-21/make-the-...
This is a big diversion form the actual point, but it's important. The vast majority of these crashes (the word "accident" is rarely used by news/DOTs/etc anymore) could be prevented by designing streets to control speed and improve visibility. So I'd argue that they're caused by poor design which comes as a result of misplaced societal values.
Re the second item in that list of causes, an interesting article came out a couple days ago: https://www.bloomberg.com/news/articles/2022-03-21/make-the-...
> could be prevented by designing streets to control speed and improve visibility
And if you make school tests easier, everyone will get a passing a grade, but that’s not the point.
The point here is that responsibility is not an area specific skill, people who are financially responsible, tend to drive responsibly, people who are reckless drivers, tend to be reckless spenders too.
And if you make school tests easier, everyone will get a passing a grade, but that’s not the point.
The point here is that responsibility is not an area specific skill, people who are financially responsible, tend to drive responsibly, people who are reckless drivers, tend to be reckless spenders too.
There are road designs that prevent driving while drunk or texting?
Maybe not drunk driving, but road design can reduce distracted driving crashes:
https://news.cision.com/property-casualty-insurers-associati...
https://news.cision.com/property-casualty-insurers-associati...
There are road designs that significantly reduce the consequences of those actions. Narrow lanes with chicanes prevent driving at high speeds. Concrete barriers prevent cars from swerving into cyclists and pedestrians. Roundabouts eliminate left turn conflicts.
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Yes, society can and should do more to encourage people to drive safely, but that doesn't mean it's impossible to do so.
The same logic applies to all sorts of things like obesity, smoking, etc.. These things obviously have multiple causes-- some societal, some individual. It's not a binary.
The same logic applies to all sorts of things like obesity, smoking, etc.. These things obviously have multiple causes-- some societal, some individual. It's not a binary.
We find a low correlation between credit score levels and income,
Interestingly, these two articles claim a correlation:
https://bluewatercredit.com/is-there-a-link-between-your-inc...
Interestingly, these two articles claim a correlation:
https://bluewatercredit.com/is-there-a-link-between-your-inc...
Low income (50% or less of MFI) = 664 median credit score
Moderate Income (50% to 79% of MFI) = 716 median credit score
Middle Income (80% to 119% of MFI) = 753 median credit score
Upper Income (120% of MFI or more) = 775 median credit score
Neither of your links contain an actual correlation measure, or links to actual source data. To even call them "articles" is a stretch, they appear to essentially be ads / link magnets (which as a category have an obvious bias).
You have to like, control for things and stuff..
You have to like, control for things and stuff..
I'm not familar with Fed notes, is there an actual published study behind that Fed note?
The amount of data and studies out there to correlate income level and credit rating is surprisingly low. The data set used by the Fed seems surprisingly weak, a self-reported survey sent out with credit card offers:
We use the Mintel/Comperemedia data (the Mintel data henceforth) that provide a unique combination of credit scores and survey-based income data for the same consumers. The Mintel data set is a monthly proprietary survey of credit card offers, with about 2,500 consumers selected to participate in the survey each month. Participants of the Mintel survey have very similar educational attainments and income to other nationwide representative household surveys, such as the Survey of Consumer Finances. The Mintel sample, however, has a somewhat higher average age and greater share of white consumers.
The amount of data and studies out there to correlate income level and credit rating is surprisingly low. The data set used by the Fed seems surprisingly weak, a self-reported survey sent out with credit card offers:
We use the Mintel/Comperemedia data (the Mintel data henceforth) that provide a unique combination of credit scores and survey-based income data for the same consumers. The Mintel data set is a monthly proprietary survey of credit card offers, with about 2,500 consumers selected to participate in the survey each month. Participants of the Mintel survey have very similar educational attainments and income to other nationwide representative household surveys, such as the Survey of Consumer Finances. The Mintel sample, however, has a somewhat higher average age and greater share of white consumers.
The link literally is a published study. Not sure if that's supposed to be some kind of gotcha. Fed research generally isn't published in third party journals.
And the method you describe isn't weak at all, compared to social sciences research in general. If anything, it's stronger than most could possibly be, since lying on the survey is a crime in this case.
And the method you describe isn't weak at all, compared to social sciences research in general. If anything, it's stronger than most could possibly be, since lying on the survey is a crime in this case.
I just expected a little more information around their data source other than "It's hard to find good data, this proprietary source (so you can't look at it) is the best we could find, it has some known biases, but we eyeballed it and it looks good enough". In particular I was looking for a full study that explained what "very similar" meant since the fairness of that input data seems it's key to their results.
if true, that doesn't look like a very strong correlation to me, at least at first blush. the difference between high and low income is 111 points on a scale that goes from 300 to 850?
In terms of getting a loan, anything below 580 is considered "very poor" (though I don't now how FICO relates to car insurance pricing). So the usable range if you're looking for good rates is more like 580-850, or 270 points.
> I'd like to know how that differs from just plain income?
Because it indirectly measures responsibility to a certain extent, though of course there are exceptions. And there’s not really another, better way to quickly check if someone is generally responsible.
And you can definitely find lower income people with good scores and higher income people with bad ones.
Because it indirectly measures responsibility to a certain extent, though of course there are exceptions. And there’s not really another, better way to quickly check if someone is generally responsible.
And you can definitely find lower income people with good scores and higher income people with bad ones.
I don't care for this analogy, as you can be as responsible as possible and still have your credit tarnished due to microeconomic black swan events (and there are numbers thrown about that a majority of citizens can't afford a $1000 financial emergency without relying on subprime credit or family). What credit scoring for insurance purposes does due is suss out who is more likely to make a claim because their finances are marginal and they need the payout versus relying on their own finances for minor claims. Similar to folks who can't afford to replace their roof, and so they make a claim with a public adjuster to have the insurer cover the cost (very popular strategy in Florida for example, causing insurers to flee the state or stop insuring homeowners seeking coverage if their roof is over 10 years old).
If one is well to do, they're going to avoid making a claim unless the economic cost of the event is catastrophic (in which case, everyone is making that claim), and so the credit score is being used as a proxy for household financial strength (which is lazy, but easier than ongoing income and asset surveillance, although some credit card companies do this for credit risk management [Amex comes to mind]).
EDIT:
> That’s the bleeding heart take, yeah.
Guilty as charged.
If one is well to do, they're going to avoid making a claim unless the economic cost of the event is catastrophic (in which case, everyone is making that claim), and so the credit score is being used as a proxy for household financial strength (which is lazy, but easier than ongoing income and asset surveillance, although some credit card companies do this for credit risk management [Amex comes to mind]).
EDIT:
> That’s the bleeding heart take, yeah.
Guilty as charged.
Whether or not there are exceptions (which of course there are) doesn't mean that there isn't a general pattern at work that is robust enough to make it a very strong predictor.
> majority of citizens can't afford a $1000 financial emergency without relying on subprime credit or family
What percentage of those are on their third or later always-financed, premium smartphone, have a $150/mo cable package, and a $150+/mo coffee habit, cook less than half their meals, are leasing a late-model car, etc.?
At some point in a long enough series of spending decisions, I think you have to consider responsibility a factor in being unable to afford $1000 unplanned expense.
What percentage of those are on their third or later always-financed, premium smartphone, have a $150/mo cable package, and a $150+/mo coffee habit, cook less than half their meals, are leasing a late-model car, etc.?
At some point in a long enough series of spending decisions, I think you have to consider responsibility a factor in being unable to afford $1000 unplanned expense.
Average rent in Missouri for a one bedroom is $1200/mo. Minimum wage is $11/hour.
Take home pay after taxes would be around $1600, leaving $400 after rent to pay for food, utilities, healthcare, transportation, etc.
Those people aren't spending $150/month on cable and they don't have a lot of spare money to put away for a rainy day.
You could move to North Dakota where average rent is around $900, but then min wage there is only $7.25/hr, giving you around $1100/mo after taxes with $200 left over for everything else.
Take home pay after taxes would be around $1600, leaving $400 after rent to pay for food, utilities, healthcare, transportation, etc.
Those people aren't spending $150/month on cable and they don't have a lot of spare money to put away for a rainy day.
You could move to North Dakota where average rent is around $900, but then min wage there is only $7.25/hr, giving you around $1100/mo after taxes with $200 left over for everything else.
Yup, though realistically, probably not too many people on minimum wage are living alone in a 1br. There probably aren't that many people on minimum wage, period, especially 7.25.
The biggest problem here isn't the income, though, it's the rising cost of housing due to anti-housing policies. Some of them explicit (e.g. zoning), some of them unfortunate side effects (e.g. extensive environmental reviews making all large construction projects take a really long time).
The biggest problem here isn't the income, though, it's the rising cost of housing due to anti-housing policies. Some of them explicit (e.g. zoning), some of them unfortunate side effects (e.g. extensive environmental reviews making all large construction projects take a really long time).
That’s the bleeding heart take, yeah.
The truth is that credit scores do what you say, AND they also measure responsibility in practice, enough to where you can find all sorts of correlations.
The truth is that credit scores do what you say, AND they also measure responsibility in practice, enough to where you can find all sorts of correlations.
I had a poor friend who couldn't afford new tires. She would buy used tires, with little life left, and replace them more frequently. It was more expensive in the long run, and less safe. If she had access to credit she could have bought new tires on credit.
It is also just a proxy for income, which is harder to quickly/cheaply verify than a credit score.
It is also just a proxy for income, which is harder to quickly/cheaply verify than a credit score.
> It was more expensive in the long run, and less safe.
Are you sure about that? It's more annoying to have to change them, but as someone who bought some long ago, it was cheaper than new, even taking into account how much wear there was.
Most used tires actually have lots of wear left - people throw them out because they get a puncture and want all the remaining tires to match. Or even more common they have 2 good ones in back, and 2 bad in front (they forgot to rotate tires), and just replace all 4.
Those 2 good ones are sold for much less than new, but they're almost as good as new.
> If she had access to credit she could have bought new tires on credit.
Once you pay interest on that credit, there's no way she would have come out ahead. Used tires are the correct thing to do here.
> It is also just a proxy for income, which is harder to quickly/cheaply verify than a credit score.
If you look at the other replies you'll see that credit score is actually not a proxy for income. It measures responsibility.
Are you sure about that? It's more annoying to have to change them, but as someone who bought some long ago, it was cheaper than new, even taking into account how much wear there was.
Most used tires actually have lots of wear left - people throw them out because they get a puncture and want all the remaining tires to match. Or even more common they have 2 good ones in back, and 2 bad in front (they forgot to rotate tires), and just replace all 4.
Those 2 good ones are sold for much less than new, but they're almost as good as new.
> If she had access to credit she could have bought new tires on credit.
Once you pay interest on that credit, there's no way she would have come out ahead. Used tires are the correct thing to do here.
> It is also just a proxy for income, which is harder to quickly/cheaply verify than a credit score.
If you look at the other replies you'll see that credit score is actually not a proxy for income. It measures responsibility.
It's more annoying to have to change them, but as someone who bought some long ago, it was cheaper than new,
The last time I got my tires changed, I paid $24 for mounting and balancing each one. Low end new tires cost around $60, so even if the used tires were free, it wouldn't take many changes for them to be more expensive. Plut it takes a couple hours to drive to the tire store and wait around to get them changes, so that's a cost too.
But I didn't buy the cheap $60 tires, I bought the $100 tires with longer treadwear warranty and better performance in rain/snow... another advantage of having more money - I can reduce my chance of getting into an accident by spending more on better tires.
The last time I got my tires changed, I paid $24 for mounting and balancing each one. Low end new tires cost around $60, so even if the used tires were free, it wouldn't take many changes for them to be more expensive. Plut it takes a couple hours to drive to the tire store and wait around to get them changes, so that's a cost too.
But I didn't buy the cheap $60 tires, I bought the $100 tires with longer treadwear warranty and better performance in rain/snow... another advantage of having more money - I can reduce my chance of getting into an accident by spending more on better tires.
I'm glad you got a good deal out of used tires. I'm sure the value is there if you look. Personally I've bought new good tires for less than $100/tire after rebate, and having them professionally installed costs over $100 where I live, so it's never seemed worth it to me.
>If you look at the other replies you'll see that credit score is actually not a proxy for income. It measures responsibility.
I do see now the other reply with the Fed's article about the low correlation (0.29) between income and credit score. That's pretty interesting/surprising to me; I stand corrected.
>If you look at the other replies you'll see that credit score is actually not a proxy for income. It measures responsibility.
I do see now the other reply with the Fed's article about the low correlation (0.29) between income and credit score. That's pretty interesting/surprising to me; I stand corrected.
[deleted]
> Are you sure about that? It's more annoying to have to change them, but as someone who bought some long ago, it was cheaper than new, even taking into account how much wear there was.
Yes, but their as an emphasis on it being done repeatedly, which is why it incurs such a large expense OVER TIME.
When I worked in the auto Industry we used to charge customers at the dealership for disposal fee on tires, unbeknownst to them a lot of the techs and us in parts had a look at the take-offs and tried to keep some around just in case for friends or workers who were on hard-times to avoid this--they also made good rollers when tying to sell spare shells/chassis projects we no longer wanted. They typical size 205-15s were always gone as they were used on your basic econoboxes and fit most steel wheels.
I've mainly bought used tires after making the mistake of buying new I bought my first car when I was a teenager as I had a bad experience with the return policy at Sears (my mom forced me to buy new). Whether out of need or simply convenience I could simply get them easier than ordering most times and I knew where to look and who to call, but I had the luxury of working in the auto Industry and living close enough to work that I could walk, ride a bike or use one of my other cars or motorcycles. But even then I had a hard time getting all-season 255/35/20 in the middle of winter in CO for my car that I brought from SoCal, it sat parked for about 2 months until the weather improved and I ended buying a beater car for nearly the same price of the tires new even with an employee discount.
> Are you sure about that? It's more annoying to have to change them, but as someone who bought some long ago, it was cheaper than new, even taking into account how much wear there was.
If that seems to be the consensus around here, it once again omits a great deal of anecdotal evidence for the majority of people. Specifically when taking how devastating COVID was for most retail/service workers in the US and around the World.
Want to know how I know this?
Bank fees are typically the most common ding on people's credit scores, perhaps second to late or missed payments on bills or credit cards and student or medical debt rounding out the trifecta: guess who incurs those most frequently? You guessed it, people who are often unable to maintain any savings and thus have a low bank balance because they live paycheck to paycheck.
I lived that way most of my young adult life, too.
When you realize how predatory the banking system is first hand, it makes your blood boil: I had friends in the culinary World who essentially had a large part of their stimulus checks eaten away due to overdraft fees, which are structured in such a way in order yield the largest fees for the bank(s) [0].
I was moving out of the country and I gave a friend some Hifi equipment, an HDTV, and a spare car I didn't want to bother selling in order to get him out of debt.
Sadly, he couldn't even afford to register the car after he sold the TV and HIFI after paying rent and utilities as his hours had been reduced due to COVID, which is once again a reminder of who has poor credit and why.
0: https://rightsradio.com/removing-unfair-bank-overdraft-charg...
Yes, but their as an emphasis on it being done repeatedly, which is why it incurs such a large expense OVER TIME.
When I worked in the auto Industry we used to charge customers at the dealership for disposal fee on tires, unbeknownst to them a lot of the techs and us in parts had a look at the take-offs and tried to keep some around just in case for friends or workers who were on hard-times to avoid this--they also made good rollers when tying to sell spare shells/chassis projects we no longer wanted. They typical size 205-15s were always gone as they were used on your basic econoboxes and fit most steel wheels.
I've mainly bought used tires after making the mistake of buying new I bought my first car when I was a teenager as I had a bad experience with the return policy at Sears (my mom forced me to buy new). Whether out of need or simply convenience I could simply get them easier than ordering most times and I knew where to look and who to call, but I had the luxury of working in the auto Industry and living close enough to work that I could walk, ride a bike or use one of my other cars or motorcycles. But even then I had a hard time getting all-season 255/35/20 in the middle of winter in CO for my car that I brought from SoCal, it sat parked for about 2 months until the weather improved and I ended buying a beater car for nearly the same price of the tires new even with an employee discount.
> Are you sure about that? It's more annoying to have to change them, but as someone who bought some long ago, it was cheaper than new, even taking into account how much wear there was.
If that seems to be the consensus around here, it once again omits a great deal of anecdotal evidence for the majority of people. Specifically when taking how devastating COVID was for most retail/service workers in the US and around the World.
Want to know how I know this?
Bank fees are typically the most common ding on people's credit scores, perhaps second to late or missed payments on bills or credit cards and student or medical debt rounding out the trifecta: guess who incurs those most frequently? You guessed it, people who are often unable to maintain any savings and thus have a low bank balance because they live paycheck to paycheck.
I lived that way most of my young adult life, too.
When you realize how predatory the banking system is first hand, it makes your blood boil: I had friends in the culinary World who essentially had a large part of their stimulus checks eaten away due to overdraft fees, which are structured in such a way in order yield the largest fees for the bank(s) [0].
I was moving out of the country and I gave a friend some Hifi equipment, an HDTV, and a spare car I didn't want to bother selling in order to get him out of debt.
Sadly, he couldn't even afford to register the car after he sold the TV and HIFI after paying rent and utilities as his hours had been reduced due to COVID, which is once again a reminder of who has poor credit and why.
0: https://rightsradio.com/removing-unfair-bank-overdraft-charg...
You know there was a time when I never knew what happened to old used tires. Imagine my privilege when I was shocked to learn that people can be so fuckin poor that they buy my shitty old used tires that are clearly unsafe. I always though the tires would just get shredded into rubber or something and recycled for other purposes.
See also : the Sam Vimes "Boots" theory of socioeconomic unfairness.
I've always hated that story, because if you go into a "goodwill" type store and look at the used shoes you'll quickly realize it's not actually a true story.
There are places where it's true - for example short term rent. And buying in bulk.
Buying used is not one of those places. Buying used is the correct thing to do for someone with low income.
There are places where it's true - for example short term rent. And buying in bulk.
Buying used is not one of those places. Buying used is the correct thing to do for someone with low income.
The story is not used boots vs new, it's shitty, Walmart brand boots vs being able to afford the really nice L.L. Bean boots.
It's starting to lose its meaning unfortunately, as most companies realize you can just charge a lot of money for the cheaply made shit and most consumers just don't have easy options to avoid buying it.
It's starting to lose its meaning unfortunately, as most companies realize you can just charge a lot of money for the cheaply made shit and most consumers just don't have easy options to avoid buying it.
Maintaining a really good credit score requires deliberate action and high conscientiousness over a long time. That is just a really strong proxy for success in life. There are loads of people with bad credit and high income - chronic gamblers, for instance.
No doubt there are high income people with low credit and low income people with high credit. But my point is that it's a lot easier to keep a good credit school on high income than it is on low income.
When your cost of necessities for living (food, rent, utilities, etc) is close to your total income, all it takes is a small disruption in your income to cause a cascade of credit lowering events that are hard to dig yourself out of.
When your cost of necessities for living (food, rent, utilities, etc) is close to your total income, all it takes is a small disruption in your income to cause a cascade of credit lowering events that are hard to dig yourself out of.
This is all true, but beside the point.
The purpose of credit scores is to predict outcome, not measure the effort or intentions of people to overcome their personal situation.
The purpose of credit scores is to predict outcome, not measure the effort or intentions of people to overcome their personal situation.
The implication the person was giving is that people who have debt problems are likely people who struggle with decision making, with lots more downstream effects than just credit.
So in an unusual way, credit could almost be an approximation of EQ.
So in an unusual way, credit could almost be an approximation of EQ.
But people who have debt problems also tend to have lower income, and it can't all be blamed on "poor decision making". My credit rating was abysmal shortly after college when I was in a low paid job and juggling payments around based on what bills could afford to pay and shifting debt to credit cards. And that low credit rating meant that the cost of credit was high, making it that much worse.
But now that I have a good income, it's easy to pay bills on time, or even early, even if a payroll snafu that's not even my fault means my paycheck is late, I have plenty of cash in the bank to pay bills.
But now that I have a good income, it's easy to pay bills on time, or even early, even if a payroll snafu that's not even my fault means my paycheck is late, I have plenty of cash in the bank to pay bills.
>I'd like to know how that differs from just plain income?
It has basically all the same advantages you mentioned but also filters out high earners with rash behavior and or low responsibility.
I know plenty of high earners with low reliability and impulsive behavior.
It has basically all the same advantages you mentioned but also filters out high earners with rash behavior and or low responsibility.
I know plenty of high earners with low reliability and impulsive behavior.
> I'd like to know how that differs from just plain income? The more money you make, the easier it is to keep clean credit. But it also gives you more control over driving to let you be a safer driver.
Basically credit score is a measure of how you manage debt, which is easier with higher income, of course. An edge case I myself recently run into is that having no debt would lower your score, as having no debt provides no evidence of how well you can manage it.
Basically credit score is a measure of how you manage debt, which is easier with higher income, of course. An edge case I myself recently run into is that having no debt would lower your score, as having no debt provides no evidence of how well you can manage it.
[deleted]
>I'd like to know how that differs from just plain income? The more money you make, the easier it is to keep clean credit. But it also gives you more control over driving to let you be a safer driver.
Doctor and nurse who work in the same hospital and have basically the same commute buy the same car. Doctor might bump someone in rush hour gridlock. Nurse is gonna nail a deer at 60mph at 4am. Doctor is gonna park it in the garage. Nurse's car is gonna get hit on the street. Doctor is gonna rent the Home Depot truck. Nurse is gonna bust the windshield trying to get a pipe in there. Etc. etc. There's tons of situational factors that make it so wealthier people can afford to be way easier on their possessions.
Doctor and nurse who work in the same hospital and have basically the same commute buy the same car. Doctor might bump someone in rush hour gridlock. Nurse is gonna nail a deer at 60mph at 4am. Doctor is gonna park it in the garage. Nurse's car is gonna get hit on the street. Doctor is gonna rent the Home Depot truck. Nurse is gonna bust the windshield trying to get a pipe in there. Etc. etc. There's tons of situational factors that make it so wealthier people can afford to be way easier on their possessions.
Would be interesting to investigate a correlation between a low-income person with a relatively high credit and an above-average increase in their income and net worth over time.
Yes. There are many complaints about credit scores, often justified, but it’s also true that they remain effective at predicting good behavior in aggregate, and also they’re easy to use.
The side arguing that we shouldn’t use credit scores this way usually don’t bother arguing for a viable alternative, because it doesn’t align with their own needs or ideology. They don’t have to worry about people repaying an income sharing agreement or loan, so the fact that not using credit scores makes managing those things harder means nothing to them.
The side arguing that we shouldn’t use credit scores this way usually don’t bother arguing for a viable alternative, because it doesn’t align with their own needs or ideology. They don’t have to worry about people repaying an income sharing agreement or loan, so the fact that not using credit scores makes managing those things harder means nothing to them.
Are easy for the lender, mean they are good for the society ?
Potentially, sure. If you can’t measure risk effectively, that means you’ll have to offer everyone the same terms. Since some portion of the population probably ‘deserves’ worse terms, they’ll take out more loans than they otherwise would, using the better terms, which further increases the aggregate risk. So, the equilibrium repayment terms you settle on will probably be worse on average than otherwise. Especially since a lack of credit scores will mean less disincentive to renege on the agreement via non-payment.
Honestly, loans seem like the least objectionable use of credit scores to me. Repayment of debt is the main thing they’re built around.
Honestly, loans seem like the least objectionable use of credit scores to me. Repayment of debt is the main thing they’re built around.
> Yeah, I remember reading about these when they launched and on paper they seemed like such a bad deal. The only group of people who would benefit from them over traditional loans are people who know they would never be able to pay off the equivalent debt.
Right, which goes to the point the author made about these agreements seeming exploitative. Why exactly aren't they (education ISAs) exploitative is my question. They're essentially loans with much fuzzier terms, and the Consumer Finance Protection Bureau agrees [0].
But, for the sake of accuracy, one should note that the author's company wasn't offering education ISAs. They were operating on more of a talent agency model, and their basic ISA was 10% of pre-tax income for 18 months [1]. I think 18 months is a reasonable term, and 10% could be a reasonable percentage, but, again, the terms are inherently opaque, because there's no way for the consumer to predict what the outcome would be.
What I wonder is what sort of jobs/careers the clients were ending up in, and where they started. Knowing that would make it possible to judge whether the outcomes were worthwhile or not. We're not talking about sending people back to school to earn additional qualifications, so, I'm guessing it wasn't a case of people landing $100+K/year engineering jobs and such. They say their aim is to be able to take someone making $40k and get them to $52k, possibly in part by moving cities. I wonder how satisfied these early clients were with what they received.
---
[0]: https://www.consumerfinance.gov/about-us/newsroom/cfpb-takes...
[1]: https://techcrunch.com/2019/11/21/placement/
Right, which goes to the point the author made about these agreements seeming exploitative. Why exactly aren't they (education ISAs) exploitative is my question. They're essentially loans with much fuzzier terms, and the Consumer Finance Protection Bureau agrees [0].
But, for the sake of accuracy, one should note that the author's company wasn't offering education ISAs. They were operating on more of a talent agency model, and their basic ISA was 10% of pre-tax income for 18 months [1]. I think 18 months is a reasonable term, and 10% could be a reasonable percentage, but, again, the terms are inherently opaque, because there's no way for the consumer to predict what the outcome would be.
What I wonder is what sort of jobs/careers the clients were ending up in, and where they started. Knowing that would make it possible to judge whether the outcomes were worthwhile or not. We're not talking about sending people back to school to earn additional qualifications, so, I'm guessing it wasn't a case of people landing $100+K/year engineering jobs and such. They say their aim is to be able to take someone making $40k and get them to $52k, possibly in part by moving cities. I wonder how satisfied these early clients were with what they received.
---
[0]: https://www.consumerfinance.gov/about-us/newsroom/cfpb-takes...
[1]: https://techcrunch.com/2019/11/21/placement/
[deleted]
> most states make it illegal for determining insurance premiums.
That's surprising to me given all of the other ways credit scores are used. Is there a rational reason to allow credit scores to be factored into hiring decisions but not insurance premiums? Or is this just the law being messy and inconsistent in reality?
That's surprising to me given all of the other ways credit scores are used. Is there a rational reason to allow credit scores to be factored into hiring decisions but not insurance premiums? Or is this just the law being messy and inconsistent in reality?
I was an auto insurance actuary in a different life. Most states do NOT ban the use of credit in auto insurance pricing, but there are some exceptions. My company actually decided not to do business in California because we could not use credit as a factor. The difference in premium due to credit could often be as high as 12x between the highest and lowest groups.
Some states (Maryland comes to mind) do limit the maximum surcharges you can implement because of credit, although there are sneaky ways around this that everyone uses, like underwriting tiers (GEICO) or using credit in multiple places (Progressive).
Some states (Maryland comes to mind) do limit the maximum surcharges you can implement because of credit, although there are sneaky ways around this that everyone uses, like underwriting tiers (GEICO) or using credit in multiple places (Progressive).
> Is there a rational reason to allow credit scores to be factored into hiring decisions...
You'll have to be more specific.
Because I live in a State where credit scores can not be used for hiring decisions unless you plan to give that person signatory powers over your company checkbook/company credit card, or unless that person works for law enforcement, or unless that person will have to deal with lots of cash at any one time, etc.
You'll have to be more specific.
Because I live in a State where credit scores can not be used for hiring decisions unless you plan to give that person signatory powers over your company checkbook/company credit card, or unless that person works for law enforcement, or unless that person will have to deal with lots of cash at any one time, etc.
I wonder what, if any, correlation exists between a low credit score and sleep deprivation. It’s not difficult to imagine that someone having trouble paying the bills also has trouble getting enough sleep.
Personally, I'm sad that this model seems to not pan out. I'm a successful bootcamp story - I graduated from App Academy about 7 years ago and have been working as software engineer since. My closest friends were all successful and all work at companies that you've heard of. The ISA model was key to me enrolling as I was skeptical of bootcamps. I was happy to pay if it worked about, but wanted to hedge my bet in case I enrolled in one of the many of the unscrupulous bootcamps that didn't actually teach anything.
In my case, I found AppAcademy really helpful because I had a set of engaged peers, I had access to TAs to help answer questions, and the material was solid. However, from what I've gathered, a lot of the industry moved away from teaching this way in order to scale their classes and make more $$. Videos have replaced live instruction, class sizes have increased, and they let anyone TA classes. I wonder if most of the failures of ISAs are due to the poor product these companies are offering vs the issues with ISAs themselves.
In my case, I found AppAcademy really helpful because I had a set of engaged peers, I had access to TAs to help answer questions, and the material was solid. However, from what I've gathered, a lot of the industry moved away from teaching this way in order to scale their classes and make more $$. Videos have replaced live instruction, class sizes have increased, and they let anyone TA classes. I wonder if most of the failures of ISAs are due to the poor product these companies are offering vs the issues with ISAs themselves.
I've worked with a few AppAcademy grads. Was pretty impressed by most. It certainly seems like one of the better ones. Congrats on your success
If you are actually producing high demand graduates, you will be able to make plenty of money by charging recruiters / hiring companies for access to them. None of these programs use this model for a simple reason, they are not actually producing high demand graduates.
To be clear, I have no idea what life is like outside of the world of selective schools and employers - as far as I know, Lambda/Bloom actually delivers on their goal of improving their student's employment prospects. But the fact that they need to charge the students at all implies we're not talking about anybody getting a FAMGA job or similar.
To be clear, I have no idea what life is like outside of the world of selective schools and employers - as far as I know, Lambda/Bloom actually delivers on their goal of improving their student's employment prospects. But the fact that they need to charge the students at all implies we're not talking about anybody getting a FAMGA job or similar.
> as far as I know, Lambda/Bloom actually delivers on their goal of improving their student's employment prospects
The root problem seems to be that most students don't end up finding jobs.
According to leaks, only 27% of graduates ended up making over $50k, which is the threshold where they had to pay back the company. Each student costs the company $13k, with $2,500 in CAC alone. At the time, the ISAs maxed out at $30k, which you'd hit way below the FAANG scale of wages.
https://www.businessinsider.com/lambda-school-promised-lucra...
Let's say you have a cohort of 100 students. It costs $1.3m to train them. 73 pay back $0. Even if the remaining 27 end up in FAANG jobs, you only make back $810k.
The root problem seems to be that most students don't end up finding jobs.
According to leaks, only 27% of graduates ended up making over $50k, which is the threshold where they had to pay back the company. Each student costs the company $13k, with $2,500 in CAC alone. At the time, the ISAs maxed out at $30k, which you'd hit way below the FAANG scale of wages.
https://www.businessinsider.com/lambda-school-promised-lucra...
Let's say you have a cohort of 100 students. It costs $1.3m to train them. 73 pay back $0. Even if the remaining 27 end up in FAANG jobs, you only make back $810k.
And from what I can tell, the root of the most-students-don't-find-jobs problem is that as much as people love to promote coding as being something for everyone, the reality is that it is not. It is actually really hard to become (and stay) a good software engineer. You have to really want it AND work really hard at it. And a lot of the people attracted to these ISA bootcamps are people who don't like their current career/job/trajectory and have heard that software pays well, and maybe they've done some Hello World tutorials that give you a bit of a rush but don't scratch the surface of what this career actually entails. Then when these people get 2 months in the bootcamp they realize that software engineering is difficult, and requires possibly more strenuous mental work than they've ever done before, but now they're on the hook and it's not easy to reverse course, so they finish the bootcamp with a half-hearted desire and poor-to-mediocre skills that hundreds of thousands of other wannabe devs from all over the world already have, and then they get smacked in the face with 6 rounds of technical interviews that they can't pass. It's not a good scenario.
[deleted]
The root problem is that in my experience completing a bootcamp tends to be a reliable signal to identifying bad hires (when it comes to software engineering). I have interviewed quite a few from different bootcamps, I've hired a few of them and so far the results have been very poor. The only good hire from a bootcamp I've had, I hired in a project manager role where she shines, she's honestly not able to code but she understands enough that she's an effective manager and has great interpersonal skills. Great hire but not a good testament to a bootcamp.
How would you recommend this problem be addressed and fixed?
I don't know if I buy the whole, "A four year degree at Stanford and 12 years of mathematics from age 6-18 is the only way to produce a successful software engineer." I know you're not making that claim explicitly, but it feels like an implicit claim.
I don't know if I buy the whole, "A four year degree at Stanford and 12 years of mathematics from age 6-18 is the only way to produce a successful software engineer." I know you're not making that claim explicitly, but it feels like an implicit claim.
> you will be able to make plenty of money by charging recruiters / hiring companies for access to them
How? What prevents those recruiter from just contacting your institution's graduates over LinkedIn?
Sound a lot like the dog-walking app that found themselves with an unreliable business model because dog owners and walkers just started using cash and circumventing the app.
How? What prevents those recruiter from just contacting your institution's graduates over LinkedIn?
Sound a lot like the dog-walking app that found themselves with an unreliable business model because dog owners and walkers just started using cash and circumventing the app.
This is a smart comment because this is exactly what we run into (I operate a coding school that uses ISAs). Employers love our graduates, but if we charged employers, we'd have to play a cat and mouse game of "please don't contact our students directly" or "please don't apply to their website and go through me". By charging students, we can be at ease with making introductions or promoting employer/student activities without having to police their communication.
That said, I believe there's a lot more we can do to help ease the financial burden from students and I love the direction of trying to move the cost of education from students to employers. I'm working on that.
That said, I believe there's a lot more we can do to help ease the financial burden from students and I love the direction of trying to move the cost of education from students to employers. I'm working on that.
> This is a smart comment because this is exactly what we run into (I operate a coding school that uses ISAs). Employers love our graduates, but if we charged employers, we'd have to play a cat and mouse game of "please don't contact our students directly" or "please don't apply to their website and go through me". By charging students, we can be at ease with making introductions or promoting employer/student activities without having to police their communication.
Have you actually tried it? I'd be pretty surprised if the employers attempted to cut you out like that. They're already accustomed to paying recruiters, and the access / promotion that you can provide them is worth the money. You could also sue them, whereas if you try to sue your students for repayment of their ISAs you run a high risk of bad PR.
Have you actually tried it? I'd be pretty surprised if the employers attempted to cut you out like that. They're already accustomed to paying recruiters, and the access / promotion that you can provide them is worth the money. You could also sue them, whereas if you try to sue your students for repayment of their ISAs you run a high risk of bad PR.
Since they're on the market looking for jobs, our graduates are pretty easy to find so any company can just contact them directly without partnering with us. There's no real way to prevent that. And, I don't want to prevent companies from reaching out to our graduates; I actually want the opposite.
Further, grads can (and should) apply to companies that aren't partnered with us. I don't want them to only apply to a limited set of partnered employers.
We've been operating for about a decade, so we've tried basically everything once :) Our current corporate partnership program is here if you're interested: https://launchschool.com/employers/placement
Further, grads can (and should) apply to companies that aren't partnered with us. I don't want them to only apply to a limited set of partnered employers.
We've been operating for about a decade, so we've tried basically everything once :) Our current corporate partnership program is here if you're interested: https://launchschool.com/employers/placement
I think the biggest issue is that they're advertising it as a way for literally anyone to break into the tech industry. I love to imagine that everyone can code but that's not necessarily the case.
If you're capable you'll probably get a job regardless of what path you take (4 year university, community college, or bootcamp) and if you're not capable then it will be a struggle. However, the people who are capable overwhelmingly choose the more traditional paths and bootcamps end up getting the rest.
If there was a way to select students who were extremely smart and create a class of those people then I think you'd get a really good flywheel going. Smart people attract other smart people.
If you're capable you'll probably get a job regardless of what path you take (4 year university, community college, or bootcamp) and if you're not capable then it will be a struggle. However, the people who are capable overwhelmingly choose the more traditional paths and bootcamps end up getting the rest.
If there was a way to select students who were extremely smart and create a class of those people then I think you'd get a really good flywheel going. Smart people attract other smart people.
Interestingly enough this exactly the model that the Recurse Center[0] uses and it's completely free to do. However, you have to be accepted to attend
[0] https://www.recurse.com/
[0] https://www.recurse.com/
Why would FAMGA companies need to pay the school?
Wouldn't the schools' students graduates apply there anyway?
I mean, if FAMGA companies need to pay recruiting fees for entry-level roles, why doesn't Stanford get paid recruiting fees?
Wouldn't the schools' students graduates apply there anyway?
I mean, if FAMGA companies need to pay recruiting fees for entry-level roles, why doesn't Stanford get paid recruiting fees?
> why doesn't Stanford get paid recruiting fees
Stanford and most tier 1-2 colleges do get paid recruiting fees. If you've ever worked with a college career center or talked to a recruiter who has, you'll know that it costs a ton of money to set up a career fair booth or organize a talk.
Stanford and most tier 1-2 colleges do get paid recruiting fees. If you've ever worked with a college career center or talked to a recruiter who has, you'll know that it costs a ton of money to set up a career fair booth or organize a talk.
AFAIK a table at a Stanford career fair costs about $1k:
https://forum.stanford.edu/events/careerfair_affiliatefactsh...
https://forum.stanford.edu/events/careerfair_affiliatefactsh...
FAMGA won't pay them but lesser known companies will pay them for access to desirable prospects.
> But the fact that they need to charge the students at all implies we're not talking about anybody getting a FAMGA job or similar.
So? Engineering pays much better than most industries so even if you're not getting into FAMGA it's still a success income wise.
So? Engineering pays much better than most industries so even if you're not getting into FAMGA it's still a success income wise.
I think Europe has an ISA program for higher ed. They call it "free college" and the ISA kicks in via a progressive tax system. Funny (sad funny) how when it is put into the private sector in America it basically collapses.
"Free college" means that the 60% of Europeans who don't go to college pay for the 40% that do. This would be the poor subsidizing the rich.
VAT and payroll taxes often make up a larger portion of the budget than income taxes. These usually are not progressive.
VAT and payroll taxes often make up a larger portion of the budget than income taxes. These usually are not progressive.
> This would be the poor subsidizing the rich.
Poor people don't even pay for their own benefits, how can you say they fund education for the rich? Rich people are net payers and poor people are net benefactors, if some poor people got an education and remained poor then their education got funded by others, if some rich people got an education and remained rich then they just paid slightly less net to the system, their education wasn't funded by the poor.
Under no circumstance do the poor fund the rich in this system. The main group that loses out are high income earners who didn't get a degree, and the main group that benefits are poor people who got a degree.
Poor people don't even pay for their own benefits, how can you say they fund education for the rich? Rich people are net payers and poor people are net benefactors, if some poor people got an education and remained poor then their education got funded by others, if some rich people got an education and remained rich then they just paid slightly less net to the system, their education wasn't funded by the poor.
Under no circumstance do the poor fund the rich in this system. The main group that loses out are high income earners who didn't get a degree, and the main group that benefits are poor people who got a degree.
>Poor people don't even pay for their own benefits, how can you say they fund education for the rich?
You're talking about the US and maybe some EU countries, but definitely not all of them. Everyone pays VAT equally regardless whether you're rich or poor. Furthermore, income taxes in most European countries aren't as progressive as in the US.
You're talking about the US and maybe some EU countries, but definitely not all of them. Everyone pays VAT equally regardless whether you're rich or poor. Furthermore, income taxes in most European countries aren't as progressive as in the US.
Even when taxes aren't progressive the more you earn and spend the more you pay. You need to have an extremely equal society for people below the upper 40% to be net payers, I doubt that applies to any country in EU.
And even then, net tax payers can all be considered to have paid for their own education, you never see a situation where poor people fund the education of rich people. At worst you can say that median earners fund the education of median earners who failed to leverage their education to get a better job. But it is mostly a wealth transfer from rich tax payers to poor graduates who didn't get lucrative jobs.
Edit: Also at least in Sweden the worker movement lobbied hard to make education as cheap and available as possible. The cheaper and easier it is to get educated the less of a wage premium it becomes to be educated, making for a fairer society. It is a problem if poor students gets tempted to take a low wage job instead of studying just to make money sooner, it is much better for everyone if they don't have to think about that choice, which is why students gets paid to study in Sweden.
And even then, net tax payers can all be considered to have paid for their own education, you never see a situation where poor people fund the education of rich people. At worst you can say that median earners fund the education of median earners who failed to leverage their education to get a better job. But it is mostly a wealth transfer from rich tax payers to poor graduates who didn't get lucrative jobs.
Edit: Also at least in Sweden the worker movement lobbied hard to make education as cheap and available as possible. The cheaper and easier it is to get educated the less of a wage premium it becomes to be educated, making for a fairer society. It is a problem if poor students gets tempted to take a low wage job instead of studying just to make money sooner, it is much better for everyone if they don't have to think about that choice, which is why students gets paid to study in Sweden.
>And even then, net tax payers can all be considered to have paid for their own education, you never see a situation where poor people fund the education of rich people.
But the poor people paying for it don't get the money back. It's going to some other government program, not necessarily to benefit them.
>It is a problem if poor students gets tempted to take a low wage job instead of studying just to make money sooner, it is much better for everyone if they don't have to think about that choice, which is why students gets paid to study in Sweden.
Why is it much better for society? Most people don't seem to end up doing jobs that are related to their field of study. Sure, there are studies that show that people with a college education are better off than those without, but you have a self-selection problem there. People who have the capability to do well in college will already do better than the average.
But the poor people paying for it don't get the money back. It's going to some other government program, not necessarily to benefit them.
>It is a problem if poor students gets tempted to take a low wage job instead of studying just to make money sooner, it is much better for everyone if they don't have to think about that choice, which is why students gets paid to study in Sweden.
Why is it much better for society? Most people don't seem to end up doing jobs that are related to their field of study. Sure, there are studies that show that people with a college education are better off than those without, but you have a self-selection problem there. People who have the capability to do well in college will already do better than the average.
This is such an attractive yet mistaken way of looking at the situation.
The more accurate framing is "100% of people pay for 100% of people to have the opportunity to go to college".
A good analogue is insurance: even though 99% of people might never file a claim, it's not 99% subsidizing the 1% the do-- it's 100% paying for protection from financial ruin that 100% receive.
Your framing would apply if there somehow were a group--people with blue eyes, people born in May, whatever--to whom access was limited.
The more accurate framing is "100% of people pay for 100% of people to have the opportunity to go to college".
A good analogue is insurance: even though 99% of people might never file a claim, it's not 99% subsidizing the 1% the do-- it's 100% paying for protection from financial ruin that 100% receive.
Your framing would apply if there somehow were a group--people with blue eyes, people born in May, whatever--to whom access was limited.
>The more accurate framing is "100% of people pay for 100% of people to have the opportunity to go to college".
It's not though. If you lack the aptitude then you will not have this opportunity. You will still have to pay for the ones that do go though. Oh, and they're going to be out-earning you in the future too.
>Your framing would apply if there somehow were a group--people with blue eyes, people born in May, whatever--to whom access was limited.
But this is the case though. Just look at college attendance in urban vs rural populations.
It's not though. If you lack the aptitude then you will not have this opportunity. You will still have to pay for the ones that do go though. Oh, and they're going to be out-earning you in the future too.
>Your framing would apply if there somehow were a group--people with blue eyes, people born in May, whatever--to whom access was limited.
But this is the case though. Just look at college attendance in urban vs rural populations.
Interesting take — hadn’t thought about it that way before.
There is one crucial piece missing, though: universities’ incentives. At least in Norway where I live, universities are paid the same for many STEM, humanities and social sciences programs. This causes an oversupply of e.g. historians compared to e.g. software developers, as universities are free to ignore labor market realities.
There is one crucial piece missing, though: universities’ incentives. At least in Norway where I live, universities are paid the same for many STEM, humanities and social sciences programs. This causes an oversupply of e.g. historians compared to e.g. software developers, as universities are free to ignore labor market realities.
Europe's "free" college is only available to those with the aptitude to likely be successful. Kids are separated into college-bound and vocational educational tracks somewhere around the middle school age.
> Europe's "free" college is only available to those with the aptitude to likely be successful. Kids are separated into college-bound and vocational educational tracks somewhere around the middle school age.
What a weird statement. I don't know why you put "free" in air quotes, when University education in Europe (or at least in Finland) is actually free. Also, nobody separates kids into vocational vs college-bound schools, kids themselves can choose. And if you later regret going to vocational school, you are welcome to change your mind later. Heck, even if you apply to a really competitive University track and you don't get in, you are free to attend lectures and attain course materials without being officially admitted into the University - this again is free.
What a weird statement. I don't know why you put "free" in air quotes, when University education in Europe (or at least in Finland) is actually free. Also, nobody separates kids into vocational vs college-bound schools, kids themselves can choose. And if you later regret going to vocational school, you are welcome to change your mind later. Heck, even if you apply to a really competitive University track and you don't get in, you are free to attend lectures and attain course materials without being officially admitted into the University - this again is free.
I think that's actually a good thing. We fetishize college in America, telling everyone that it is the only path to a successful future. I think this has duped people into taking on student loan debt, only for them to find out they would have made more money as a plumber or electrician.
There are plenty of vocational opportunities out there that can provide a high standard of living and also a rewarding career.
There are plenty of vocational opportunities out there that can provide a high standard of living and also a rewarding career.
The trades can be great, but they are absolute hell on your body.
It can also be pretty expensive to get set up. You don't get into making serious money until you work for yourself, which frequently involves a six-figure investment in tools and equipment.
I do agree that college as a way to get ahead in life is over-sold in the US in particular. It's not a coincidence that colleges don't track student outcomes past graduation, despite their sales pitch of 'preparing students for the future'.
It can also be pretty expensive to get set up. You don't get into making serious money until you work for yourself, which frequently involves a six-figure investment in tools and equipment.
I do agree that college as a way to get ahead in life is over-sold in the US in particular. It's not a coincidence that colleges don't track student outcomes past graduation, despite their sales pitch of 'preparing students for the future'.
This, and similar differences, seem to be completely forgotten about when people bring up the European model for college. It gets tiring pointing it out because the normal reaction is to ignore it entirely. Rarely is useful discussion produced on what purpose a college should serve and how the European model is in contradiction to some of the underlying philosophy advocating for it (specifically around the idea of who should college be for).
Everyone can attend college in Europe, just that you might need to retake some high school courses if you didn't take them. It is exactly the same system as in USA where some students have to do 4 years of college while others can use AP credits to skip a year and finish in 3. In Europe we just make those AP credits mandatory and students have to take them at separate schools before they attend, which is also why students in Europe finish college in 3 years.
Don't worry. German public schools are a complete joke compared to the first semester at any German university. Even if you are on the "college bound" track they won't think twice about tossing you away.
This is only part of the troth where I live: Austria.
Here you can take a year long course to learn the basics to go to university without going to High-School first- a friend of mine did exactly that.
OFC in reality this is much more difficult due to other factors such as work, family and so on and requires a good degree of discipline, but going to university does so too...
Here you can take a year long course to learn the basics to go to university without going to High-School first- a friend of mine did exactly that.
OFC in reality this is much more difficult due to other factors such as work, family and so on and requires a good degree of discipline, but going to university does so too...
just forgot to add:
we also have the possibility to go to evening school (for free) to get a High-School diploma and join university as a regular student. My Brother-in-law did that. He learned to be a Baker (in Austria and Germany we have a very interesting craftsmanship system where you train on the job that works out pretty well) and wen to university.
we also have the possibility to go to evening school (for free) to get a High-School diploma and join university as a regular student. My Brother-in-law did that. He learned to be a Baker (in Austria and Germany we have a very interesting craftsmanship system where you train on the job that works out pretty well) and wen to university.
The main difference is that Europe education also comes with thousand of strings attached.
In Spain for instance, it isn’t really free (though it’s cheap compared to the US, around 2.8-3k$/y) but you absolutely get what you are paying for.
I know people who where on meetings deciding the country-wide “update” to the curriculum, and the main reason for vetoing new topics was that it displaced outdated topics for which college X had an expert that was “too old to learn new things, but young enough that he had at least a decade before retiring” (their words).
In Spain for instance, it isn’t really free (though it’s cheap compared to the US, around 2.8-3k$/y) but you absolutely get what you are paying for.
I know people who where on meetings deciding the country-wide “update” to the curriculum, and the main reason for vetoing new topics was that it displaced outdated topics for which college X had an expert that was “too old to learn new things, but young enough that he had at least a decade before retiring” (their words).
"Europe" doesn't exist for these purposes, the countries vary wildly, with the only thing that stays constant being that it won't by default saddle you with crushing student debt like the US. The UK has been steadily increasing fees, while e.g. Germany, Norway and Denmark pay you for studying, with the German voters successfully lobbying against attempts to introduce fees while I was studying. The German university system at least is also quite robust and egalitarian in the sense that there are many avenues into university and it is truly free - whole also being high quality (in my opinion). Where Germany is comparatively behind I'd secondary education - the three tier system sucks and I can't wait until the Finnish system properly takes over this continent.
Health care and university education are things that Europe just does systematically more efficient than the US in the sense of cheaply providing high quality to lots of people. Research I'd be open to debate and business it has to be said the US is miles ahead of e.g. Germany (I'm so jealous of California's NDA and employee IP laws)
Health care and university education are things that Europe just does systematically more efficient than the US in the sense of cheaply providing high quality to lots of people. Research I'd be open to debate and business it has to be said the US is miles ahead of e.g. Germany (I'm so jealous of California's NDA and employee IP laws)
It's nice to think there is a large untapped market of people who are ignored by traditional lenders, who have old-fashioned ways of measuring applicants and overlook people who don't fit the traditional mould.
There are a lot of important points in the thread, such the difficulty of enforcing terms compared to traditional loans, and the amount of cash needed up front which can only be made back over time -- but solving those problems wouldn't fix the fundamental problem that it's hard to succeed in lending when your target market is comprised of people who are unlikely to pay you back.
The ISA startups learned that the traditional lenders were right, including in their use of credit scores to evaluate applicants -- a lot of people ignored by traditional lenders really just aren't people you want to lend money to.
There are a lot of important points in the thread, such the difficulty of enforcing terms compared to traditional loans, and the amount of cash needed up front which can only be made back over time -- but solving those problems wouldn't fix the fundamental problem that it's hard to succeed in lending when your target market is comprised of people who are unlikely to pay you back.
The ISA startups learned that the traditional lenders were right, including in their use of credit scores to evaluate applicants -- a lot of people ignored by traditional lenders really just aren't people you want to lend money to.
> It's nice to think there is a large untapped market of people who are ignored by traditional lenders, who have old-fashioned ways of measuring applicants and overlook people who don't fit the traditional mould.
True. I'm amazed that this line resonates with anyone, ever. Banks will take every cent they can get, the idea they are just leaving money on the table is... not backed up by history (see 2000s house lending....) Credit is available in crazy high amounts to anyone who can pay it back.
There is a large market who are usually ignored (but not always...) - people who need money but cannot pay it back. That is a social issue to solve, but it's not going to be solved by a for profit finance company.
True. I'm amazed that this line resonates with anyone, ever. Banks will take every cent they can get, the idea they are just leaving money on the table is... not backed up by history (see 2000s house lending....) Credit is available in crazy high amounts to anyone who can pay it back.
There is a large market who are usually ignored (but not always...) - people who need money but cannot pay it back. That is a social issue to solve, but it's not going to be solved by a for profit finance company.
Australia’s public universities (that is most of them) basically operate on a subsidised ISA built into the tax system called HECS. It’s been going for almost 30 years and was started to double the rate of higher education participation, which was happened.
There are huge problems with the Australian university system, but I’d say HECS is one of the lesser problems.
If you read the tweet thread this HECS model solves a couple of the big issues.
There is no adverse selection if the scheme is open to all at any institution, and there is no legal and regulatory risk since, I believe, the repayment of the loan is legally mandated through payroll rather than being subject to a private school chasing students around in courts.
Yes, for most repayment is via mandatory payroll withholding tax. If you fall outside of that system it’s also included in your annual tax return.
If you want to see ISAs in practice, a very close thing to look at is the UK student loan programme.
Students can borrow 9k per year for tuition + 9-12k for living expenses (all univerisities are capped at 9k fees despite incredibly disparate outcomes and revenues). So a full time student could be borrowing between 27k (3 year degree, self-finance living) and 126k (6 year degree for a doctor, london cost of liiving). Or nothing at all if your parents can pay your way (why do this? We'll see...).
It grows indexed to RPI+3% if you earn enough. This was a "loan" but you only pay back when you earn over a threshold. When the system was introduced the threshold was like 25k and it was indexed up by inflation. You pay 9% on everything over the threshold and the loan is forgiven in 30 years if you haven't finished repaying.
Here was the problem: Before the first students under this scheme even graduated, the "loan" terms were changed to be more onerous on the students, and have continued to do so pretty much every year since. This year the minimum threshold was due to increase by 5% due to inflation this year. The government froze the threshold increasing the burden on graduates by hundreds of pounds. Essentially, it turns out that by taking this loan you signed a blank cheque for the government to tax you whatever it wanted in perpetuity. The latest proposals are that new student loans won't be forgiven for an extra decade.
Why all this fucking about? Well firstly, it's young people who don't vote. Secondly, it's a relatively small demographic so you can mess them about with relatively little poltical implications. But most importantly, as all the data showed: The scheme doesn't work. It doesn't generate enough revenue to actually pay for the thing it's meant to pay for. Most people are just going to age out of paying off the loan.
Students can borrow 9k per year for tuition + 9-12k for living expenses (all univerisities are capped at 9k fees despite incredibly disparate outcomes and revenues). So a full time student could be borrowing between 27k (3 year degree, self-finance living) and 126k (6 year degree for a doctor, london cost of liiving). Or nothing at all if your parents can pay your way (why do this? We'll see...).
It grows indexed to RPI+3% if you earn enough. This was a "loan" but you only pay back when you earn over a threshold. When the system was introduced the threshold was like 25k and it was indexed up by inflation. You pay 9% on everything over the threshold and the loan is forgiven in 30 years if you haven't finished repaying.
Here was the problem: Before the first students under this scheme even graduated, the "loan" terms were changed to be more onerous on the students, and have continued to do so pretty much every year since. This year the minimum threshold was due to increase by 5% due to inflation this year. The government froze the threshold increasing the burden on graduates by hundreds of pounds. Essentially, it turns out that by taking this loan you signed a blank cheque for the government to tax you whatever it wanted in perpetuity. The latest proposals are that new student loans won't be forgiven for an extra decade.
Why all this fucking about? Well firstly, it's young people who don't vote. Secondly, it's a relatively small demographic so you can mess them about with relatively little poltical implications. But most importantly, as all the data showed: The scheme doesn't work. It doesn't generate enough revenue to actually pay for the thing it's meant to pay for. Most people are just going to age out of paying off the loan.
By living in a country you "sign a blank cheque" for the government to tax you as it sees fit, sort of. "Tuition fees" were always a graduate tax by the back door. This kind of thing goes back to Thatcher looting the GCHQ pension fund back in the '80s. I would say "don't make a "contract" with the government", but even if you don't have a "contract" they can still decide they want to take your stuff.
Here's a kicker - you actually don't have to live in the country for you to still need to pay back the loan.
Well you don't have to live in the country for them to decide you owe them money in other ways too. Both the "loan" and any other taxes or sanctions are only enforceable to the extent that you have assets in the UK.
Economics has a lot to say about how bad an idea sharecropping is. (This is apart from the obvious racism/slavery aspect of sharecropping in the southern US).
When you take a percent of income, you necessarily demotivate the worker. It comes down to this: Once the bare necessities are paid for should I work an extra hour, or should I go home and spend some more time with the family? If the income for the extra hour is decreased, it necessarily decreases the worker's interest in working the extra hour. Or maybe they still work two extra hours, but not three.
To make this work out you either need to make the payback a simple loan (the traditional solution) or you need to put an achievable cap on payments. Either way the optimal societal goal is that if the worker works a bit harder they should earn 100% of the profit from the extra work.
Historically this worked out as the disaster that was sharecropping. The tenant earned 50% and provided labor, and the landowner (who also provided capital equipment) earned 50%. The natural outcome was that laborers rationally did not work as hard as they could have, and the landowner failed to properly invest in equipment since extra income from productivity gains was halved.
Percent of income may make investors salivate, but it's a self-defeating idea.
When you take a percent of income, you necessarily demotivate the worker. It comes down to this: Once the bare necessities are paid for should I work an extra hour, or should I go home and spend some more time with the family? If the income for the extra hour is decreased, it necessarily decreases the worker's interest in working the extra hour. Or maybe they still work two extra hours, but not three.
To make this work out you either need to make the payback a simple loan (the traditional solution) or you need to put an achievable cap on payments. Either way the optimal societal goal is that if the worker works a bit harder they should earn 100% of the profit from the extra work.
Historically this worked out as the disaster that was sharecropping. The tenant earned 50% and provided labor, and the landowner (who also provided capital equipment) earned 50%. The natural outcome was that laborers rationally did not work as hard as they could have, and the landowner failed to properly invest in equipment since extra income from productivity gains was halved.
Percent of income may make investors salivate, but it's a self-defeating idea.
I think it’s potentially attractive to people for two reasons. One is that it’s “safer” than a traditional loan: if the education doesn’t work out and you don’t get a good job, well, you only have to pay a percentage of your income, so your low wage job is still okay. Or maybe it’s contingent on a certain type of job, so you don’t have to pay anything.
Second reason is that ostensibly, it aligns incentives. The education company only gets paid if you do, so they’re highly incentivized to provide effective education that actually lands you a good job.
But of course, there’s also downsides, as the twitter OP states.
Second reason is that ostensibly, it aligns incentives. The education company only gets paid if you do, so they’re highly incentivized to provide effective education that actually lands you a good job.
But of course, there’s also downsides, as the twitter OP states.
>> Either way the optimal societal goal is that if the worker works a bit harder they should earn 100% of the profit from the extra work
That doesn't seem to have really ever been true for a lot of people. It's very rare for workers to be paid in proportion to the amount of profit they produce for a company. Salaries are almost always determined by the labor market and the average wage for the role.
Wage labor, which most of these ISAs seem designed to promote, seems to be fundamentally different from the kind of sharecropping relationship you describe.
I'm not saying ISAs are good either, but that this doesn't seem to be true for many, if not most, workers today.
That doesn't seem to have really ever been true for a lot of people. It's very rare for workers to be paid in proportion to the amount of profit they produce for a company. Salaries are almost always determined by the labor market and the average wage for the role.
Wage labor, which most of these ISAs seem designed to promote, seems to be fundamentally different from the kind of sharecropping relationship you describe.
I'm not saying ISAs are good either, but that this doesn't seem to be true for many, if not most, workers today.
Sorry I don't see why this is true? If you're in an income sharing agreement, the only way for you to make more money is to work more, but this is how it works for people who don't have income sharing agreements too. The motivation isn't changed, one person just has more take home pay than the other person. (And if that person has a loan instead of an income sharing agreement, the disposable income between the two individuals are identical)
> optimal societal goal is that if the worker works a bit harder they should earn 100% of the profit from the extra work
We already have income taxes (wherein the last hour you work is taxed at the full amount of your marginal [highest] tax rate) which serve to act against this goal in the same way, right?
We already have income taxes (wherein the last hour you work is taxed at the full amount of your marginal [highest] tax rate) which serve to act against this goal in the same way, right?
Yeah, that's why economist say the least bad tax is the land value tax, not the income tax we have now.
The adverse selection issues seemed glaring to me with ISA's - they would appeal tremendously for folks without great options. For folks with good academic career success looking to transition less so?
Also, people often forget there are plenty of good financing options available for low-income students. I got free tuition at a well regarded state university.
So the main target for something like an ISA are students from middle-class families that want to pursue an expensive education at a "cool" school.
So the main target for something like an ISA are students from middle-class families that want to pursue an expensive education at a "cool" school.
the main target for ISA's seem to be people needing career changes in my experience. (at least for people doing it and having any kind of actual success from it)
A great example would be the person who went to college and got degree and training to become a teacher, and then found out they would never be able to afford a home staying a teacher and decided to make a change. Another real life example would be the ex police officer who decided they couldn't do that job anymore. (I've met both of these people before)
There are alot of careers that seem attractive to people who then realize they cant make a living doing that but have already used up their financial aid / scholarships / student loans getting themselves into that career.
Dont get me started on ex lawyers who go into coding.
A great example would be the person who went to college and got degree and training to become a teacher, and then found out they would never be able to afford a home staying a teacher and decided to make a change. Another real life example would be the ex police officer who decided they couldn't do that job anymore. (I've met both of these people before)
There are alot of careers that seem attractive to people who then realize they cant make a living doing that but have already used up their financial aid / scholarships / student loans getting themselves into that career.
Dont get me started on ex lawyers who go into coding.
Yeah, this is the market I'm talking about. For example, say I'm pretty successful in another field (medicine / accounting / law) - earning maybe 500K. Been coding on the side since I was young, enjoy it. I'd probably be a "success" in some ISA type school (past good history with testing / studying etc). But the income split is not appealing, I'd be chasing ultimately a more management level position longer term tech side. So I'll select away from ISA model.
Now you have someone who has struggled, they did art studies, in and out of school, realize the movie director dream is probably not going to happen and art pays horribly in general for day to day work. ISA is perfect for them, they have no income prospects currently. But this may be an adverse selection in terms of someone who has struggled with education generally (though a fantastic story if they make it through.)
Now you have someone who has struggled, they did art studies, in and out of school, realize the movie director dream is probably not going to happen and art pays horribly in general for day to day work. ISA is perfect for them, they have no income prospects currently. But this may be an adverse selection in terms of someone who has struggled with education generally (though a fantastic story if they make it through.)
Thing is those people might not have struggled educationally at all. The ex math teacher i talked about? Made 4.0 in everything. Didnt even owe student loans because they had grants/scholarships. The ex laywers all did just fine educationally. (and their massive debts probably didnt help their credit scores)
Where it gets really messed up is the people who did what they were "supposed to do" and got a STEM degree in Chemistry/Biology/Physics. Only to discover that there is basically no employment for people with just Bachelors degrees in those fields and they would have to go deeper down debt holes just to make ultimately less money than what most coding jobs pay......
Those people do GREAT at coding boot camps and technical training btw.
Where it gets really messed up is the people who did what they were "supposed to do" and got a STEM degree in Chemistry/Biology/Physics. Only to discover that there is basically no employment for people with just Bachelors degrees in those fields and they would have to go deeper down debt holes just to make ultimately less money than what most coding jobs pay......
Those people do GREAT at coding boot camps and technical training btw.
ISAs are also appealing to people pursuing degrees without an intent to become high earners, such as those looking to 'broaden their horizons' or 'earn their Mr./Mrs.'.
>'earn their Mr./Mrs.'.
The saying really doesn't work for "Mr." because the male honorific doesn't change based on marital status. You get you "Mr." just by existing, you don't need to earn it.
The saying really doesn't work for "Mr." because the male honorific doesn't change based on marital status. You get you "Mr." just by existing, you don't need to earn it.
I was just trying to avoid the appearance of misogyny; though I know some men who have changed their last names to their wife's, and I'm not sure how else to quickly allude to that.
> Better than an ISA is an income-dependent loan with some minimum amount that must be paid back regardless of the program outcome.
Sure, but this is just about the least sexy thing I've ever read. This is the sort of boring, incremental improvement that the world actually builds on, but I'm not sure it's going to attract outrageous amounts of investor capital and make you the hippest new company in the valley.
Sure, but this is just about the least sexy thing I've ever read. This is the sort of boring, incremental improvement that the world actually builds on, but I'm not sure it's going to attract outrageous amounts of investor capital and make you the hippest new company in the valley.
It's also worth considering why a participant might "behave poorly". Even if you select for "good people", those in circumstances bad enough to need an ISA are probably more likely to hit harsh times in the future and simply be unable to repay the loan - they suffer from generational poverty, for example, which means if a close loved one becomes injured or badly ill they may have no choice but to abandon their education and work multiple low wage jobs to support their family. At that point the ISA investment is wasted because they're unlikely to finish that education anytime soon or be able to convert it into a high-wage job. People in poverty situations also often have worse health, which means you are dealing with higher odds of the participant being unable to pay it back because they get sick, or die.
I would not be shocked if it turns out that in practice ISAs are a money-losing proposition due to all the risks involved, even if they can be an effective way to make education accessible to people. Education being so ridiculously expensive in the US is still a relatively new thing.
I would not be shocked if it turns out that in practice ISAs are a money-losing proposition due to all the risks involved, even if they can be an effective way to make education accessible to people. Education being so ridiculously expensive in the US is still a relatively new thing.
I agree with the thread as a reflection of the industry.
Still, as an individual the results bum me out because I'm now getting paid to develop software in a warm dry building thanks to the low risk of an ISA. So why ISAs clearly have issues, the safety they provide is amazing for someone with limited means.
The key takeaway:
> Better than an ISA is an income-dependent loan with some minimum amount that must be paid back regardless of the program outcome.
As for collection, I suggest structuring it as a loan, but with an 'income share' option in the contract. That is: participants are legally getting a loan, but the loan has an option to pay back less via income share. Dont pay? Then just pursue them for the loan.
> But people with high credit scores tend to have better, cheaper options than ISAs. Also, using credit scores for ISAs is... largely missing the point.
The self-selection problem is actually identical to loans. If you offered loans without checking credit score, you would end up with the exact same issue--people with poor credit would jump at the chance, and people with good credit would decline and pay upfront because they can.
> Better than an ISA is an income-dependent loan with some minimum amount that must be paid back regardless of the program outcome.
As for collection, I suggest structuring it as a loan, but with an 'income share' option in the contract. That is: participants are legally getting a loan, but the loan has an option to pay back less via income share. Dont pay? Then just pursue them for the loan.
> But people with high credit scores tend to have better, cheaper options than ISAs. Also, using credit scores for ISAs is... largely missing the point.
The self-selection problem is actually identical to loans. If you offered loans without checking credit score, you would end up with the exact same issue--people with poor credit would jump at the chance, and people with good credit would decline and pay upfront because they can.
Another adverse selection problem: the education programs that should be using ISA's are the ones where there is a high risk that it will not increase your earning potential. For example, small liberal arts colleges. They are probably the least likely to do so, for that very reason.
I'm making some assumptions here that the ISA context is free coding camp like education for a cut of the participant's future income:
What I always wondered was regarding these agreements:
"People aren't used to making these kinds of deals. Do they understand them? Do they want them? Who is going to take them?"
I assumed the attractiveness to the individuals was NOT taking out a loan and folks taking more of a 'long shot' and if it didn't work, things weren't going to work out for everyone.
Also, I took a bootcamp that even with folks paying for the camp / taking personal risk, half those folks had no place there. After one month half the class should have been dis-invited "this isn't your thing". Finding good candidates is hard / IMO unpredictable.
What I always wondered was regarding these agreements:
"People aren't used to making these kinds of deals. Do they understand them? Do they want them? Who is going to take them?"
I assumed the attractiveness to the individuals was NOT taking out a loan and folks taking more of a 'long shot' and if it didn't work, things weren't going to work out for everyone.
Also, I took a bootcamp that even with folks paying for the camp / taking personal risk, half those folks had no place there. After one month half the class should have been dis-invited "this isn't your thing". Finding good candidates is hard / IMO unpredictable.
After having seen people enter into ISAs (not this one) I'd avoid them like the plague. They might be okay for a traditional university. You could do the math and see what it says. For other institutions it's a scam.
There's a serious incentive problem and I'm not talking about the student. The company put literally nothing into it. A few "lectures" to provide "training" and that was it. No help lining up jobs. No preparation for interviews. The "teacher" had no clue how to teach and anyway the material was useless. Nobody would hire you based on that material. An ISA works well if you get a share of someone else's income and don't have any costs.
There's a serious incentive problem and I'm not talking about the student. The company put literally nothing into it. A few "lectures" to provide "training" and that was it. No help lining up jobs. No preparation for interviews. The "teacher" had no clue how to teach and anyway the material was useless. Nobody would hire you based on that material. An ISA works well if you get a share of someone else's income and don't have any costs.
This tweet thread was likely a subtweet of a controversial Sam Altman tweet the day before: https://twitter.com/sama/status/1505599701864701954
> A version of college replacement I'm super interested in:
> Find the smartest and most driven 18 year olds in the world, and give them 'tenure'--say a decade+ of salary, resources to work on whatever they want, and a smart peer group--in exchange for small % of future earnings.
> A version of college replacement I'm super interested in:
> Find the smartest and most driven 18 year olds in the world, and give them 'tenure'--say a decade+ of salary, resources to work on whatever they want, and a smart peer group--in exchange for small % of future earnings.
Can someone add some of the missing context about the ISA experiment mentioned in the tweet thread?
[deleted]
it’s a colloquialism, “the experiment” refers to the collective belief that ISAs had potential risk to revolutionise funding for education etc.
And ISA being..?
An an article about them - https://www.nerdwallet.com/article/loans/student-loans/incom...
An example contract - https://www.purdue.edu/backaboiler/disclosure/contract.html
An example contract - https://www.purdue.edu/backaboiler/disclosure/contract.html
Income Sharing Agreement, I.e: what bloomtech (fka Lambda) use. No payment upfront, but the institution gets a cut of income above $x until the repayment amount is met.
Instead of taking out student loans, enter an agreement to share your income to fund the ISA and pay for future recipients.
tbh the distinction feels kind of artificial given how many student loans are "paid off" entirely via income-driven repayment plans.
The main distinction is that traditional student debt isn't conditional or easy to discharge.
There is a sizable portion of individuals who do not complete or utilize their degrees and are thus left with low income, large amounts of debt, and little prospect of paying it off.
ISAs solve this problem.
There is a sizable portion of individuals who do not complete or utilize their degrees and are thus left with low income, large amounts of debt, and little prospect of paying it off.
ISAs solve this problem.
Why not simply hire someone on a 3-year contract with the understanding that the first x months will be paid for but spent in learning a new skill and the other x months will be spent in earning back the course + paid hours?
There should be a strict rule in the contract, that ending it before the 3 years are over will have a pricey consequence, so that you are incentivized to only sign up if you understand the work involved and will not quit after just doing the training.
There should be a strict rule in the contract, that ending it before the 3 years are over will have a pricey consequence, so that you are incentivized to only sign up if you understand the work involved and will not quit after just doing the training.
EPAM did this in Hungary for example. A friend went through this. (The training was a lot of Java classes/courses, pretty in depth.)
They put their projects on their resumes. I used to work with a lot of EPAM developers, they were all excellent.
They also write internal tools as learning projects.
They also write internal tools as learning projects.
I wonder if you can apply the lessons learned here to, say, various creative fields, most notably producing music and writing books.
When an artist gets a recording contract they will get an advance and the resources to produce recorded music (eg studio time, a producer). The label will end up owning the masters and get a percentage of sales. Whatever percentage the artists get first has to go towards the label's "costs" being all those services they originally provided (eg studio time) such that an album can make millions before the artist gets paid at all [1]..
Only the very top artists can actually make a living of royalties and sales. Almost all artists have to support themselves by performing. It's also why top artists who support the current system (cough Metallica cough) never talk about performance income. TDhey try to frame music piracy as stealing from artists when the artist almost never gets any of that money.
But why I bring this up is that it seems to bear a lot of similarities with these income sharing arrangements (eg the mismatched goals of the participants). 1[]: https://www.gerryhemingway.com/piracy2.html
When an artist gets a recording contract they will get an advance and the resources to produce recorded music (eg studio time, a producer). The label will end up owning the masters and get a percentage of sales. Whatever percentage the artists get first has to go towards the label's "costs" being all those services they originally provided (eg studio time) such that an album can make millions before the artist gets paid at all [1]..
Only the very top artists can actually make a living of royalties and sales. Almost all artists have to support themselves by performing. It's also why top artists who support the current system (cough Metallica cough) never talk about performance income. TDhey try to frame music piracy as stealing from artists when the artist almost never gets any of that money.
But why I bring this up is that it seems to bear a lot of similarities with these income sharing arrangements (eg the mismatched goals of the participants). 1[]: https://www.gerryhemingway.com/piracy2.html
It would be interesting if you could create incentives to prod folks in the right direction and align incentives. For example, you could reward high-earning students by giving them a cut of income generated from students who follow. Or feature successful students in advertising materials in a way that makes them proud or gives them more career options. Something akin to a Dean's List.
> For example, you could reward high-earning students by giving them a cut of income generated from students who follow.
I know this is not what you're suggesting, but your post just reminded me of something. Many of those schools offer anywhere from $100 to $3,000 referral bonuses to alumni (or influencers) who refer new students to it. This can be a very perverse incentive.
So if you ever speak to an alumnus of a coding bootcamp, make them believe that someone else already referred you to their bootcamp. They're much more likely to tell you the truth about their experience if they know they can't earn a commission from you.
I know this is not what you're suggesting, but your post just reminded me of something. Many of those schools offer anywhere from $100 to $3,000 referral bonuses to alumni (or influencers) who refer new students to it. This can be a very perverse incentive.
So if you ever speak to an alumnus of a coding bootcamp, make them believe that someone else already referred you to their bootcamp. They're much more likely to tell you the truth about their experience if they know they can't earn a commission from you.
I remember running the notional internal rate of return/IRR on an ISA for a bootcamp that did them and was appalled. Payday loans under a different name, wrapped up in good intentions and signaling.
What was more appalling was the stone faced defense that came from the developer community, Lambda themselves, and enablers who partnered with Lambda who could have run that same math but chose not to. Spending a moment in bootcamp student communities would expose the outcomes of these, and similar practices (changing curriculums midstream, student -> teacher hiring, CIRR's iffy-at-best oversight). Nobody chose to listen.
Seeing Lambda go under, and the general decline of ISAs, is a tremendous net positive. For every 1 success story, there seem to be 99 failures trapped by an ISA or liquidated savings.
Fwiw, that school is still around under "The Bloom Institute of Technology." Sounds familiar as it inches towards for-profit school models.
What was more appalling was the stone faced defense that came from the developer community, Lambda themselves, and enablers who partnered with Lambda who could have run that same math but chose not to. Spending a moment in bootcamp student communities would expose the outcomes of these, and similar practices (changing curriculums midstream, student -> teacher hiring, CIRR's iffy-at-best oversight). Nobody chose to listen.
Seeing Lambda go under, and the general decline of ISAs, is a tremendous net positive. For every 1 success story, there seem to be 99 failures trapped by an ISA or liquidated savings.
Fwiw, that school is still around under "The Bloom Institute of Technology." Sounds familiar as it inches towards for-profit school models.
If you are out there wanting to learn - checkout a local community college. You can transfer quickly, easily and finish up the last two years at almost any university you want (UCs, Standford, Caltech, CSU, etc). A high proportion of students drop out of these harder universities in the first two years anyway - so they have room. I took a few courses there to save cash - college professors in my classes taught at Berkley anyway and would use the same material. "Enrollment Fee: $31 per unit" - this is INSANE to not take advantage of this. The courses DIRECTLY transfer. Lambda school (or whatever fake bootcamp crap) credits have no transfer ability.
https://www.deanza.edu/
https://www.deanza.edu/
De Anza was great. When I went, it cost $6 per unit. I took waaaay more credits than I was able to transfer, but I learned soooo much.
Adjusted for inflation, it should be $13 now. That fact that the price of college has outpaced inflation by so much is positively criminal. Kids these days are getting screwed sideways.
Adjusted for inflation, it should be $13 now. That fact that the price of college has outpaced inflation by so much is positively criminal. Kids these days are getting screwed sideways.
>First, the lack of skin in the game leads to very poor participant behavior.
is there a reason why they can't require some amount of money down (eg. a few thousand dollars), or does that go against the ISA philosophy?
is there a reason why they can't require some amount of money down (eg. a few thousand dollars), or does that go against the ISA philosophy?
"A few thousand dollars" is an absolute shitload of money to most people who aren't riding the computer programming bubble, and especially young people. It may as well be $50,000 for how hard it would be for them to come up with without taking out a loan, the same way I'm not any more likely to be able to jump 20 feet in the air than I am to be able to jump to the moon.
I haven't had to count pennies at the gas pump rather than just filling it up all the way every time, or keep a running tally of what's going into my grocery cart, in many years, but I remember what it was like. $1,000 was a fuckton of money at the time. An unexpected bill for a couple hundred dollars might ruin my whole month, and maybe the next one too.
I haven't had to count pennies at the gas pump rather than just filling it up all the way every time, or keep a running tally of what's going into my grocery cart, in many years, but I remember what it was like. $1,000 was a fuckton of money at the time. An unexpected bill for a couple hundred dollars might ruin my whole month, and maybe the next one too.
Back in 2015, when this type of thing was still novel, I participated in an ISA program that required a $3,000 deposit. It was refundable if you failed a (demonstrably) good-faith effort to applying for jobs, or rolled into the payment once you landed one.
This was a substantial amount of money for me at that time, but I probably wouldn't have applied for the program had it not been for the ISA. I was unwilling to take on new debt, and I didn't have enough money for an upfront payment. The deposit seemed like a reasonable expenditure to save toward precisely because the ISA showed that the program itself had skin-in-the-game.
This was a substantial amount of money for me at that time, but I probably wouldn't have applied for the program had it not been for the ISA. I was unwilling to take on new debt, and I didn't have enough money for an upfront payment. The deposit seemed like a reasonable expenditure to save toward precisely because the ISA showed that the program itself had skin-in-the-game.
Plans like these are generally intended to help precisely those people who don't have a few thousand dollars lying around. (Heck, even many traditional students taking out loans would be hard pressed to put a few thousand dollars down instead of taking out a student loan. That's a lot of money to most people in the US.)
I think that the explanation about credit scores probably applies here; much as people with good credit scores had better options than ISAs, people with some cash to put up do as well.
My understanding is that a lot of the folks you'd want to target for something like this don't have appreciable funds to put down in the first place.
People who can put money down generally have access to other, more traditional loans (or don't need loans at all).
This is a one sided thread not taking into account the bad behaviour by the boot camps themselves. There are plenty who just point their “students” to the Odin Project and go, here’s your reading material. Then they pair untrained kids with each other and call it a day. Where is their skin in the game?
I’m talking from experience. There’s one, which I won’t name, roping in kids from South Asia, Africa, and South America and tying them up with ISAs. I wouldn’t call them scummy but don’t feel great about them either.
I’m talking from experience. There’s one, which I won’t name, roping in kids from South Asia, Africa, and South America and tying them up with ISAs. I wouldn’t call them scummy but don’t feel great about them either.
The middleman is going to get paid one way or another. My main issue with ISAs is that they often take an excessively high percentage of your income and/or for too long a period. A lot of them are structured as if an ongoing service is being provided.
As an aside, I can’t stand long Twitter threads like this. It’s so ugly and inefficient. Just write a blog post. I know Twitter has a lot of eyeballs and is free and easy to use, but so is Medium or Ghost.
As an aside, I can’t stand long Twitter threads like this. It’s so ugly and inefficient. Just write a blog post. I know Twitter has a lot of eyeballs and is free and easy to use, but so is Medium or Ghost.
Wikipedia's article on income-share agreements, for those unfamiliar with the concept:
https://en.wikipedia.org/wiki/Income_share_agreement
https://en.wikipedia.org/wiki/Income_share_agreement
Austen from Bloom (Lambda School) had some interesting thoughts on this as well.
https://twitter.com/Austen/status/1506072723302207494
https://twitter.com/Austen/status/1506072723302207494
His actions speak louder than his words. Along with the name change, the company pivoted to pushing high interest (12.5%) loans on students.
The ISAs also underwent dramatic changes. They now last up to eight years, max out at $42k, and apply to any job, whether or not it's tech. You could attend the program for a few months, drop out once you realize it's a disaster, get a job four years later as a truck driver, and end up on the hook for your full ISA.
The ISAs also underwent dramatic changes. They now last up to eight years, max out at $42k, and apply to any job, whether or not it's tech. You could attend the program for a few months, drop out once you realize it's a disaster, get a job four years later as a truck driver, and end up on the hook for your full ISA.
[deleted]
>We found indicators far more predictive than FICO.
Would be interesting to know more details about these indicators.
Would be interesting to know more details about these indicators.
>Also, participants judge educational success in many ways that don't trivially reduce to "make more money".
This is something the VC bean-counters will forever struggle to wrap their minds around. Not everything is about money, even in commerce.
This is something the VC bean-counters will forever struggle to wrap their minds around. Not everything is about money, even in commerce.
[deleted]
You could see this being an awful business to work in. Your clients need to be unicorns in many ways. The type of person who would use this is not the type of client the business could succeed with.
> adverse selection problems
I gotta admit feeling some schadenfreude that people trying to revive indentured servitude end up being out-grifted by their own customers
I gotta admit feeling some schadenfreude that people trying to revive indentured servitude end up being out-grifted by their own customers
If someone takes out a loan, goes to school, and then has to pay off the loan is that also "indentured servitude" in your mind? It just seems like two different ways to finance a purchase (training) that has a future value.
The ISA's that I'm familiar with don't bind the person to a particular employer, have minimum salaries that are required before the payment is taken out of paychecks, etc. It seems very different than "indentured servitude" and much closer to a loan.
The ISA's that I'm familiar with don't bind the person to a particular employer, have minimum salaries that are required before the payment is taken out of paychecks, etc. It seems very different than "indentured servitude" and much closer to a loan.
Agreed, at least if comparing to American student loans, which certainly come with the same philosophical/ethical "servitude issues".
ISAs seem to align incentives between lender and loan taker better than traditional loans, (although as pointed out not perfectly). More income = more money for both. Most people who are getting training/education likely aims to maximize their income in a 1-2 year time frame.
Now, which one is actually the best deal varies from case to case. If you pay more dollars on average in total with an ISA, that'd be expected but hardly the fault of the ISA issuer. That's just an unfortunate side effect of debt and risk calculations that are true across the board.
ISAs seem to align incentives between lender and loan taker better than traditional loans, (although as pointed out not perfectly). More income = more money for both. Most people who are getting training/education likely aims to maximize their income in a 1-2 year time frame.
Now, which one is actually the best deal varies from case to case. If you pay more dollars on average in total with an ISA, that'd be expected but hardly the fault of the ISA issuer. That's just an unfortunate side effect of debt and risk calculations that are true across the board.
Modest income sharing as an alternative to loans isn’t any more “indentured servitude” than taxes are.
ISA’s weren’t modest; they were heavier share than income-based student loan options.
But they are also free of runaway interest and lifelong debt.
Payments are higher if you succeeded, but the downside risk is lower.
This is the fundamental tradeoff.
Payments are higher if you succeeded, but the downside risk is lower.
This is the fundamental tradeoff.
> But they are also free of runaway interest and lifelong debt
Federal student loans with an income based based repayment plan are free of both those things (fixed maximum repayment period and fixed interest rates at origination.)
Federal student loans with an income based based repayment plan are free of both those things (fixed maximum repayment period and fixed interest rates at origination.)
Federal loans have maximum repayment periods of 10-30 years, but that does not mean the loan is forgiven at the end of this period. If you fail to make regular and complete payments, the loan can persist for the entirety of your life.
By runaway interest, I mean compounding debt, not change of interest rate. If payment on a federal loan is low or non-existent, the debt will increase exponentially over time.
Take for example a student who takes ~50K in debt, but fails to graduate or secure income to pay the annual interest.
With a federal loan, payments may be deferred or reduced, but the debt will continue to increase with time. If not payed off, this will last for the student's life.
With some ISAs, there may be no payments required, and the entirety of the debt disappears after X years.
By runaway interest, I mean compounding debt, not change of interest rate. If payment on a federal loan is low or non-existent, the debt will increase exponentially over time.
Take for example a student who takes ~50K in debt, but fails to graduate or secure income to pay the annual interest.
With a federal loan, payments may be deferred or reduced, but the debt will continue to increase with time. If not payed off, this will last for the student's life.
With some ISAs, there may be no payments required, and the entirety of the debt disappears after X years.
> Federal loans have maximum repayment periods of 10-30 years, but that does not mean the loan is forgiven at the end of this period.
Yes, for income-driven plans that are paid as required, it does.
> If you fail to make regular and complete payments, the loan can persist for the entirety of your life.
If you don't pay an ISA as required it becomes an unpaid debt with all the normal features of unpaid debt, it doesn't just vanish if you fail to pay. So “federal loans don't disappear if you don't pay them”, while true, isn't really a difference.
Yes, for income-driven plans that are paid as required, it does.
> If you fail to make regular and complete payments, the loan can persist for the entirety of your life.
If you don't pay an ISA as required it becomes an unpaid debt with all the normal features of unpaid debt, it doesn't just vanish if you fail to pay. So “federal loans don't disappear if you don't pay them”, while true, isn't really a difference.
>Yes, for income-driven plans that are paid as required, it does.
Thank you for sharing this, I was not aware and found supporting information here: https://studentaid.gov/manage-loans/repayment/plans/income-d...
>If you don't pay an ISA as required it becomes an unpaid debt with all the normal features of unpaid debt, it doesn't just vanish if you fail to pay.
Correct, ISAs don't vanish if you meet the criteria for payment, but choose not to. This is only comparable to a federal loan, and one with an income-driven plan.
This says nothing about ISAs verses other federal loans, and ISAs versus other private loans.
Thank you for sharing this, I was not aware and found supporting information here: https://studentaid.gov/manage-loans/repayment/plans/income-d...
>If you don't pay an ISA as required it becomes an unpaid debt with all the normal features of unpaid debt, it doesn't just vanish if you fail to pay.
Correct, ISAs don't vanish if you meet the criteria for payment, but choose not to. This is only comparable to a federal loan, and one with an income-driven plan.
This says nothing about ISAs verses other federal loans, and ISAs versus other private loans.
I wish this were a short blog-post, as we need more of those, but it seems like a clear and incisive analysis of the issues facing ISAs.
It is a short blog post. HN is just allergic to posting Threadreader links to things like this for some reason. I don't understand what's so terrible about posting an easy to read version of the exact same content, rather than having to deal with Twitter's terrible UI for such content.
https://threadreaderapp.com/thread/1505923007096700939.html
https://threadreaderapp.com/thread/1505923007096700939.html
I don't mean to be contrarian, but thread reader doesn't do that much to improve reading.
It just removes some of the visual noise.
The bigger issue is that we organize our writing into paragraphs.
Threadreader doesn't know how to do that.
So reading tweets on it is still a grating experience.
It just removes some of the visual noise.
The bigger issue is that we organize our writing into paragraphs.
Threadreader doesn't know how to do that.
So reading tweets on it is still a grating experience.
There are three sentences per tweet, separated by blank lines. If that's bad formatting, it's not because it's tweets or because of threadreader, it's because he chose to write like that.
I'd say threadreader doesn't change much here, but it's very good for longer threads that twitter mangles.
I'd say threadreader doesn't change much here, but it's very good for longer threads that twitter mangles.
I would prefer it to be posted on a blog, but can't support ThreadReader. It seems like ThreadReader is violating copyright, unless they were licensed/authorized by the author or Twitter.
I guess you don't use archive sites then, either, right? Or search engines? Google creates an unlicensed derived work (their index) based on the sites they crawl. That seems like a silly justification. There's no way Twitter isn't aware of what ThreadReader is up to. If Twitter cared enough, all it would probably take is a cease and desist to stop ThreadReader for good.
I avoid using archive sites when the original is still live (and unedited). With respect to Google and other search engines, I usually visit the website providing the snippet, and have issues with their derivations/plagarism.
You may think I'm being silly, but I'm acting in accordance with my values, as I'm sure you do in situations where I'd disagree with you.
You may think I'm being silly, but I'm acting in accordance with my values, as I'm sure you do in situations where I'd disagree with you.
> I avoid using archive sites when the original is still live (and unedited).
Do copyright concerns disappear when the original has been taken down or edited by the copyright holder?
Do copyright concerns disappear when the original has been taken down or edited by the copyright holder?
We're getting way off-topic here; are you actually interested in my perspective, or just looking to start an argument?
Also a good reason: We as a society decided indentured servitude is not a concept we'd like to pursue.
Indentured servitude: nothing to do with ISAs.
The only similarity is that you work to pay off a debt. By that definition, car loans, student loans, house loans, credit cards are all "indentured servitude".
Look at it this way: if you had a loan where payments were income-based, and where the loan was forgiven after a certain amount of time, would that be indentured servitude?
The only similarity is that you work to pay off a debt. By that definition, car loans, student loans, house loans, credit cards are all "indentured servitude".
Look at it this way: if you had a loan where payments were income-based, and where the loan was forgiven after a certain amount of time, would that be indentured servitude?
This reminds me of the vapid, self-serving farewell letters you would find on fuckedcompany.com during the dotcom implosion.
ISAs failed because they are a stupid idea that rips off consumers. Most people smart enough to qualify are suave enough to notice this. These exist to take advantage of naive people.
Investors with money like to keep it, and there’s so much risk involved in the process they need to rip you off to make a margin. So they sell you dreams and deliver a worthless product, financed with a novel predatory financing scheme.
(This isn’t a new scam either - certification mills used to do this with CCNA and MCSE certs years ago, except they usually targeted federal funds for displaced workers instead of the convoluted modern bond indenture model)
I do volunteer mentoring as a service project type of thing, and one of the kids I worked with was attracted to one of these. I refocused him to a community college program where for ~$8,000 he has an associates degree and superior skillset. He got a great job and is positioned to further his education if he decides to do so.
The gross promotion of these schemes really affected my view of some of the tech luminaries who shamelessly pumped it.
ISAs failed because they are a stupid idea that rips off consumers. Most people smart enough to qualify are suave enough to notice this. These exist to take advantage of naive people.
Investors with money like to keep it, and there’s so much risk involved in the process they need to rip you off to make a margin. So they sell you dreams and deliver a worthless product, financed with a novel predatory financing scheme.
(This isn’t a new scam either - certification mills used to do this with CCNA and MCSE certs years ago, except they usually targeted federal funds for displaced workers instead of the convoluted modern bond indenture model)
I do volunteer mentoring as a service project type of thing, and one of the kids I worked with was attracted to one of these. I refocused him to a community college program where for ~$8,000 he has an associates degree and superior skillset. He got a great job and is positioned to further his education if he decides to do so.
The gross promotion of these schemes really affected my view of some of the tech luminaries who shamelessly pumped it.
I am missing a lot of context.
What is the common goal here?
What was the selection process as to who can join?
How long is the agreement?
What is the common goal here?
What was the selection process as to who can join?
How long is the agreement?
It's basically an extremely high interest loan, combined with bizarro access to banking records. Like for most of these ISAs if you couldn't make the payments, they want it access to your bank account to see that you really couldn't.
You have this really strange setup where if your income increases even marginally, the ISA kicks in. Lambda school, which fortunately also collapsed was notorious for this.
Student loans aren't necessarily bad, they just need harder. Caps. Like federal loans are very reasonable, private ones are not.
Outside of attending medical school or law school, private loans are just a bad idea. On top of that, I think private loans are given out too willy nilly. Anyone can go to a bottom tier law school and take out $200,000 worth of loans.
A good compromise here would be to make private loans fully forgivable, but federal loans are a fantastic deal and help me improve my life.
40k in student loan debt, which is about the max you can take out federally for undergrad, isn't bad.
Anything above 100k can easily be insurmountable, the interest just accumulates way too fast for most people to pay it off.
Then again, I never understood why lambda school needed to be so expensive. You're not running a real school, there's no reason you can't just tell people to take a free class off YouTube, and then have them pay $500 or so to have a project graded. And maybe more adventurous companies would be open to recognizing that project as proof you'd be a good hire.