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Lambda School agrees to end deceptive educational financing practices

dfpi.ca.gov

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Re: Lambda School agrees to end deceptive educational financing practices

#21

Post by gruez »

yawnxyz wrote: post #15
renewiltord wrote: post #5

Earlier quoted context omitted.

The reason is that the applicants would not be loaned anything if they could discharge debt in bankruptcy. i.e. student loans would not exist unless collateralized and we don't want people to have to put up collateral equal to the value of the loan. This is because if I were a student, the optimal route would be to take the largest loan possible while on no assets, then go to the most expensive university, then decla…

So this just creates an incentive to push as many kids through school as possible and to take out the biggest loans, right? Shouldn't there be a metric built in that says something like "the quality of education didn't meet the expectations of the loan, so the loan can be discharged"? Where's the warranty for the lender?

>Shouldn't there be a metric built in that says something like "the quality of education didn't meet the expectations of the loan, so the loan can be discharged"?

How do you prove whether the failings are because of the student or the school? The fact that there are three parties involved (the student, the school, the lender) also complicates things. Finally, lenders would bake this risk into the loan itself, which means higher interest rates for people going to non-famous institutions.

Re: Lambda School agrees to end deceptive educational financing practices

#23

Post by pseudalopex »

nrmitchi wrote: post #20
pseudalopex wrote: post #18

Earlier quoted context omitted.

The headline implies the practices were deceptive before they were illegal. It doesn't imply they were breaking the law previously.

I didn't realize the HN headline was different than the linked article, which is "Lambda School Reaches Settlement with DFPI, Agreeing to End Deceptive Educational Financing Practices". "Reaching a settlement" with an enforcement agency implies, at least to me, that you were acused of breaking a law.

Lambda School engaged in deceptive but apparently legal practices. A new law made them illegal. Lambda School continued to engage in the now illegal practices. The state began enforcement proceedings. The parties settled.

Re: Lambda School agrees to end deceptive educational financing practices

#24

Post by tedivm »

nrmitchi wrote: post #16
renewiltord wrote: post #5

Earlier quoted context omitted.

The reason is that the applicants would not be loaned anything if they could discharge debt in bankruptcy. i.e. student loans would not exist unless collateralized and we don't want people to have to put up collateral equal to the value of the loan. This is because if I were a student, the optimal route would be to take the largest loan possible while on no assets, then go to the most expensive university, then decla…

For what it's worth (I learned this recently and was equally surprised by it) student loans were not non-dischargable until 2005. Ie, for all time before 2005, a student could do what you describe, and as far as I know it wasn't a widespread practice. It is a relatively new thing that really only came in to existance coincidentally around the same time that education became so expensive that going through the effort…

Bankruptcies have to get approved by a judge, and often debt is restructured instead of being discharged. The scenario where someone takes on a bunch of debt then declares bankruptcy on graduation is a joke because judges wouldn't allow it. They may get their loan deferred or restructured to help buy time to get a job, but they wouldn't just discharge it like that. These kind of made up "what if" scenarios to justify broken laws are always weird to me especially when there aren't so far from reality.

Re: Lambda School agrees to end deceptive educational financing practices

#25

Post by dragonwriter »

yawnxyz wrote: post #15
renewiltord wrote: post #5

Earlier quoted context omitted.

The reason is that the applicants would not be loaned anything if they could discharge debt in bankruptcy. i.e. student loans would not exist unless collateralized and we don't want people to have to put up collateral equal to the value of the loan. This is because if I were a student, the optimal route would be to take the largest loan possible while on no assets, then go to the most expensive university, then decla…

So this just creates an incentive to push as many kids through school as possible and to take out the biggest loans, right? Shouldn't there be a metric built in that says something like "the quality of education didn't meet the expectations of the loan, so the loan can be discharged"? Where's the warranty for the lender?

> Shouldn't there be a metric built in that says something like "the quality of education didn't meet the expectations of the loan, so the loan can be discharged"?

There are, in fact, several policies in this area, the most significant is Borrower Defense to Repayment: https://studentaid.gov/borrower-defense/

Re: Lambda School agrees to end deceptive educational financing practices

#26

Post by nrmitchi »

pseudalopex wrote: post #23
nrmitchi wrote: post #20

Earlier quoted context omitted.

I didn't realize the HN headline was different than the linked article, which is "Lambda School Reaches Settlement with DFPI, Agreeing to End Deceptive Educational Financing Practices". "Reaching a settlement" with an enforcement agency implies, at least to me, that you were acused of breaking a law.

Lambda School engaged in deceptive but apparently legal practices. A new law made them illegal. Lambda School continued to engage in the now illegal practices. The state began enforcement proceedings. The parties settled.

Part of my point, that I did not make clear, is that this law came into effect January 1st. A 3 month turn-around between something becoming illegal, and a "settlement" being reached, feels awfully fast to me, and implies that everyone involved was actually trying to follow this new law.

Re: Lambda School agrees to end deceptive educational financing practices

#27

Post by renewiltord »

dhdhhdd wrote: post #17
renewiltord wrote: post #5

Earlier quoted context omitted.

The reason is that the applicants would not be loaned anything if they could discharge debt in bankruptcy. i.e. student loans would not exist unless collateralized and we don't want people to have to put up collateral equal to the value of the loan. This is because if I were a student, the optimal route would be to take the largest loan possible while on no assets, then go to the most expensive university, then decla…

And so the education would get cheaper. Nothing drives up prices more than easy access to big loans.

I'm with you. I believe that we need the following reform:

* Information Reform: Schools should be required to report median income of graduating class by major by year (with number of declined-to-disclose). Students should know what they're going to get out of this program.

* Incentive Alignment: School programs above a certain cost should only be payable either up-front or via income share agreement. Schools should only be paid if their education yielded economic gain for students but students should be permitted escape valves if possible.

* Bankruptcy Reform: Student loans should be discharged in bankruptcy, ISAs should not.

Re: Lambda School agrees to end deceptive educational financing practices

#28

Post by imtringued »

renewiltord wrote: post #5
yawnxyz wrote: post #2

"contains a provision that falsely asserts that the Contract is a “qualified educational loan” ..." Did University of Phoenix qualify for "educational loans"? I'm constantly surprised why this sector gets a pass like this from bankruptcy.

The reason is that the applicants would not be loaned anything if they could discharge debt in bankruptcy. i.e. student loans would not exist unless collateralized and we don't want people to have to put up collateral equal to the value of the loan. This is because if I were a student, the optimal route would be to take the largest loan possible while on no assets, then go to the most expensive university, then decla…

Sounds like student loans simply don't work then. Why would you choose a free market mechanism only to then decide that you don't like it and corrupt it entirely for the sake of charity/welfare?

If you want the government to play such a role in funding education why not let it simply do so? It's not like you are wasting the money by creating a productive workforce.

Re: Lambda School agrees to end deceptive educational financing practices

#29

Post by austenallred »

Hey everyone,

Pretty excited to reach settlement on this one. The DFPI is a new regulatory agency in California that was tasked with reviewing Lambda School’s new incentive-aligned tuition (https://lambdaschool.com/tuition/tuition-options) in California. They came back requesting that we update a bankruptcy provision in the agreement to clarify that these agreements are dischargeable in bankruptcy, and to do a review of our marketing to make that clear. All things we’re happy to do, and always happy to work with regulators!

Re: Lambda School agrees to end deceptive educational financing practices

#30

Post by pradn »

austenallred wrote: post #29

Hey everyone, Pretty excited to reach settlement on this one. The DFPI is a new regulatory agency in California that was tasked with reviewing Lambda School’s new incentive-aligned tuition ( https://lambdaschool.com/tuition/tuition-options ) in California. They came back requesting that we update a bankruptcy provision in the agreement to clarify that these agreements are dischargeable in bankruptcy, and to do a revi…

Your bizarre cheeriness in the face of "Agreeing to End Deceptive Educational Financing Practices" is offputting, especially when coupled with the way college financing has led to generational deadweight, anxiety, and hopelessness.
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