[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!

[sandofsky]

This is a bizarre response. You were caught putting deceptive language in your contracts. You now have to hire a third-party to ensure all of your contracts comply with the law, and 90 days to review all of your previous marketing material and certify it wasn't dishonest. You're on probation. This is nothing to be excited about.

This is similar to when you fought with the BPPE for a year because they insisted you can't operate in California while offering ISAs. After you finally gave up the fight, and agreed to not offer ISAs, they approved you. You said:

> Their approval is a huge testament to our team and our students, as well as an official endorsement of our all-remote, career-focused educational model.

The BPPE does not endorse schools. They simply said you were no longer operating illegally.

[lacker]

You were caught putting deceptive language in your contracts.

Honestly, the California website claims this was "deceptive" but to me that seems like an exaggeration. Lambda claimed this thing wasn't dischargeable in bankruptcy, the state of California says actually it is. Okay, fine. It doesn't mean Lambda was doing something malicious. It's not like California makes it extremely transparent and clear what the rules are for starting a new sort of educational financing. When you do something new that's covered unclearly by California regulations it is no surprise to have this sort of issue.

To me the real injustice is that California does not allow ISAs. Students are not idiots incapable of making deals for themselves, and the big ripoff in education right now isn't ISAs at coding schools, it's taking out a regular student loan to get a worthless degree at a mediocre university. All of this argument about "catching Lambda's deception" is a distraction from the real problems with education.

[jfim]

> Lambda claimed this thing wasn't dischargeable in bankruptcy, the state of California says actually it is. Okay, fine. It doesn't mean Lambda was doing something malicious.

Maybe I'm missing something, but if someone were in the unfortunate position to be considering bankruptcy, wouldn't knowing whether this loan is actually dischargeable or not be a big deal to them? It seems like it would be.

[kethinov]

It's not a loan, it's an income share agreement. Someone facing bankruptcy is unlikely to be making enough income to be subject to ISA repayment which only comes into effect if the student is earning above the threshold for it.

I really don't get why some people dislike ISAs. They're way better than student loans.

[dragonwriter]

> It's not a loan, it's an income share agreement.

(1) The “Income share agreement” is a $30K loan with various wrinkles,

(2) Lambda School, for legal reasons, doesn’t use ISAs in California, but a somewhat less obfuscated $30,000 loan, the “Retail Installment Contract”.

> I really don't get why some people dislike ISAs. They're way better than student loans.

They aren’t better than federal student loans, which have an optional income driven repayment plans, which are a similar or lower percentage of discretionary income than most ISAs are of total income.

They may sometimes be better than the available nonfederal loans for people attending institutions not qualified for federal loans, but that’s a pretty low bar.

[lacker]

It's important, I just mean that the law isn't obvious here, so we shouldn't jump from "Lambda made a false statement about the California law" to "Lambda is maliciously trying to mislead students".

[dragonwriter]

> I just mean that the law isn't obvious here

Are you seriously arguing that it is plausible that Lambda School has a good faith mistaken belief that they were qualified to participate in federal Title IV financial aid, but somehow made no mention or use of that qualification other than falsely claiming debts to the school were “qualified education loans” with limited dischargeability in bankruptcy?

Or are you claiming that it is not obvious that Title IV financial aid eligibility is a requirement for loans for a school to be qualified education loans?

That...strains credulity.

> "Lambda made a false statement about the California law"

Actually they broke California law by making a false statement of federal law. (“qualified education loan” is a federal-law category that determines both if the loan qualifies for the student loan interest deduction and if it has the “undue-hardship-only” discharge rule im bankruptcy.)

[tw04]

How is the law not obvious? There are a handful of things that are exempt from bankruptcy, "income sharing" isn't one of those things. Going through the list of exempted items, I can't find a single one where I go "oh, yes that sort of applies".

http://www.californiabankruptcy.info/exemptions.html

[pseudalopex]

That lists property someone can keep. Did you mean this page?[1]

[1] http://www.californiabankruptcy.info/nondischarge.html

[bpodgursky]

Well, student loans _are_ one of those things.

ISAs seem a lot closer to "student loans" than, like, a new boat. I don't think this is totally unreasonable.

[dragonwriter]

> It's not like California makes it extremely transparent and clear what the rules are for starting a new sort of educational financing.

The rules are federal, and its very clear that the requirements for a loan to be qualified education loan (which gets tax deductible interest and protection from easy discharge) include that it must be used solely for costs of education at an institution eligible for Title IV financial aid under federal law.

This is not something it is plausible someone running a business in the space would make an honest mistake about, it is a targeted deception to discourage debtors from seeking available bankruptcy relief, leveraging the fact that lying to discourage people from such relief for existing debt, unlike lying to induce purchases, is not usually prosecutable as fraud.

[dragonwriter]

> This is a bizarre response.

Really, its standard corporate spin when accepting a settlement, “We’re super happy to work with regulators to make things better.” When, of course, if the company had any interest in making things better the regulator would never have needed to get involved in the first place.

Obviously, its deceptive, but its not bizarre, its just making PR lemonade out of PR lemons.

[samatman]

You can't seriously believe that regulators have completely clean motives and actions.

I'm still getting up to date on what happened here, but corporate malfeasance isn't incompatible with aggressive and even corrupt regulation. In fact my starting place is that both are likely.

What I reject is the claim that the State only steps in and takes action if the party they're investigating has done something wrong. That's absurd.

[dragonwriter]

> You can't seriously believe that regulators have completely clean motives and actions.

Since nothing in the comment you are responding to implies, or even has anything to do with, that, I’m not sure, other than love of pure non-sequitur, you would post that.

[samatman]

> if the company had any interest in making things better the regulator would never have needed to get involved in the first place.

Kind of precludes alternate motives, like "the regulator is captured by existing interests and is prosecuting the company despite the company's sincere intention to make things better".

[dragonwriter]

You are taking that phrase out of the context of the sentence it is in, which obscures the meaning, apparently for the sole purpose of having someone to debate with about something that is completely irrelevant to both the comment you have extracted it from and the issue that comment is addressing.

[LMYahooTFY]

>When, of course, if the company had any interest in making things better the regulator would never have needed to get involved in the first place.

This is ridiculous oversimplification. Can you elaborate at all on how the company has "no interest in making things better"? It's an interesting attack on the 'character' of a corporate entity, that's almost impossible to disprove.

[imgabe]

The language was misleading because the law isn't clear. Lambda isn't in charge of which loans are and are not dischargeable in bankruptcy and it seems they thought that the type of loan they offered was not.

You should be asking why every school loan is not dischargeable in bankruptcy.

[devmunchies]

I don't know anything about lambda school outside the HN threads but it seems like you're in every lambda school thread going back 'n forth with allen. kinda funny honestly.

makes your arguments seem a little less credible since you clearly have a bone to pick but like I said, I don't know anything about lambda school. maybe you're justified, idk.

[LMYahooTFY]

This is a more bizarre response. You literally take the worst interpretation out of everything, and calling it accurate would be very generous.

>You were caught putting deceptive language in your contracts.

I'm curious if there's a way you can mess up language in a contract that isn't deceptive/misleading?

>You're on probation. This is nothing to be excited about

This is standard procedure, but you're clearly painting it as if they've been knocked down another peg.

>The BPPE does not endorse schools. They simply said you were no longer operating illegally.

And this is blatantly false and makes me further question everything else you've stated.

https://www.bppe.ca.gov/schools/approved_schools.shtml

Try the search function.

[sandofsky]

> I'm curious if there's a way you can mess up language in a contract that isn't deceptive/misleading?

According to the linked document, this was not a typo. This line contradicts reality: "this extension of credit is a qualified educational loan and is subject to the limitations on dischargeability in bankruptcy contained in Section 523(a)(8) of the United States Bankruptcy Code."

In addition, the document points out, "Certain Lambda School marketing has included representations implying its program is “free.”" It is not free.

> This is standard procedure, but you're clearly painting it as if they've been knocked down another peg.

The parent post made it sound like they were out of the woods, when they clearly aren't. If I were the subject of this press release, I would not be "excited."

> And this is blatantly false and makes me further question everything else you've stated.

I did not say they were still operating illegally. I said that they used the word endorsement, when the state had simply approved them. The two words mean different things.

> Try the search function.

I searched for the word "endorse" on that page, and found zero matches.

[LMYahooTFY]

>According to the linked document, this was not a typo. This line contradicts reality: "this extension of credit is a qualified educational loan and is subject to the limitations on dischargeability in bankruptcy contained in Section 523(a)(8) of the United States Bankruptcy Code."

This in no way answered my question.

>In addition, the document points out, "Certain Lambda School marketing has included representations implying its program is “free.”" It is not free.

Interesting and not related to the contract, we're talking about marketing. I find your comments extremely disingenuous, you're switching contexts of "misleading" in the very separate domains of marketing and legal contracts which should be too obvious.

The order is non-specific, so what do you want to get into? "Free until you get a job" comes to mind, is that misleading? I'll argue it's true, given that you don't pay them money when you don't have a job.

>The parent post made it sound like they were out of the woods, when they clearly aren't. If I were the subject of this press release, I would not be "excited."

It's certainly a step forward in my opinion, and you seem to take issue with the fact that it wasn't a flawless approval. Fair enough, your opinion is noted.

>Approval is very different than endorsement.

This seems like doubling down on a total misrepresentation.

Austen clearly said approval, then elaborated to claim it was an endorsement of their relatively unique education model. You don't need to be that generous to imagine that 'approval' by a body (which only approves or does not) of a new/innovative model is something of an endorsement of this new model.

You picked out endorsement, and responded as if he had said "BPPE endorsed our program". It's clearly not what he said.

Austen even appears to have removed the egregious line, which I imagine makes sense from a PR standpoint as people will try to misrepresent it as you have.

[sandofsky]

> This in no way answered my question.

I can't believe I have to make this explicit, but ok.

> I'm curious if there's a way you can mess up language in a contract that isn't deceptive/misleading?

Reading the contract, a student will think that they can't discharge the debt through bankruptcy. In reality, yes, they can discharge the debt through bankruptcy. It's right there in the order:

"The Bankruptcy Non-Dischargeability Provision is misleading because, contrary to the Dischargeability Provision, the Contract is not a “qualified educational loan,” as defined in section 221, subdivision (d)(1), of the Internal Revenue Code of 1986, and is not subject to the limitations on dischargeability pursuant to section 523, subdivision (a)(8), of the United States Bankruptcy Code."

A 'mess up' would be misuse of an Oxford comma. You don't 'mess up' dropping a very specific reference to a very specific legal code that does not apply.

> Interesting and not related to the contract, we're talking about marketing. I find your comments extremely disingenuous, you're switching contexts of "misleading" in the very separate domains of marketing and legal contracts which should be too obvious.

The order cites their deceptive marketing. Presumably that's why they were ordered to review all of their previous marketing.

> The order is non-specific, so what do you want to get into?

I copied and pasted directly from the order.

> You picked out endorsement, and responded as if he had said "BPPE endorsed our program". It's clearly not what he said.

I copied and pasted from his own post.

Since we can't reach common ground on basic facts, I see no reason to engage with you any further.

[LMYahooTFY]

> Since we can't reach common ground on basic facts, I see no reason to engage with you any further.

I'm sorry, do you feel I'm not being generous in my interpretation? I certainly feel you're not, is that not a guideline here?

>I can't believe I have to make this explicit, but ok.

You don't have to, you misunderstood me. If a contract is flawed, is there a result other than 'misleading'?

Do we expect all contracts to be flawless 100% of the time? Are all of the flaws deliberate?

> You were caught putting deceptive language in your contracts.

So I'll try to be generous, I read this as you accusing him of deliberately misleading people. You assert that this cannot be a 'mess up'. Am I wrong?

> I copied and pasted directly from the order.

I'm asking if there's marketing material you'd like to point out and discuss. I quoted some, do you not want to engage on that?

>I copied and pasted from his own post.

Which I explained, he explicitly stated approval, and then at worst, embellished upon it.

Is there no overlap between "approval" and "endorsement" that ever warrants the statement he made?

> Since we can't reach common ground on basic facts, I see no reason to engage with you any further.

You're extremely adversarial, yet I'm unsurprised you want to withdraw.

[pseudalopex]

They requested you stop making false claims about dischargeability. And about the program being free. Calling the former clarifying is deceptive. So is omitting the latter.

[pradn]

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.

[davidw]

What's he supposed to do? Rant about the government? Making the best of it and moving on is probably the best move, since it doesn't sound like a big hit to their business.

Also, it looks like you get out of Lambda School debts via bankruptcy, which you don't with regular college, so that's... an improvement?

[foerbert]

This response just appears disconnected from reality. It's like watching somebody talk about how getting punched in the face was a wonderful and purely positive experience. It's just baffling.

There are options other than being weirdly positive and ranting. They could not say anything at all. They could give one of several varieties of mea culpa. They could simply state their intentions going forward.

[sandofsky]

> What's he supposed to do?

Apologize.

> Also, it looks like you get out of Lambda School debts via bankruptcy, which you don't with regular college, so that's... an improvement?

"You can't discharge student debt," is actually a myth. I have two relatives that discharged their loans due to financial hardship. It isn't trivial, but there's a process.

The issue with ISAs, in their current form, is the lack of legal framework. Short of bankruptcy, the best you can do is lawyer up. Lambda School targets people who can't afford lawyers.

[LMYahooTFY]

I imagine you might ignore me here since you opted out of our other thread, but I'd like to ask:

What specific issues do you have with the ISA?

[pseudalopex]

Saying nothing was an option.

[anchpop]

Why would you prefer he say nothing? As long as he’s not misleading people I don’t see what the harm of commenting is.

[pseudalopex]

Framing a request to stop making false claims about dischargeability as a request to clarify them is misleading. Making it seem like those were the only false claims the settlement covered is misleading too.

[minimaxir]

Spinning a negative as a positive is misleading at best.

[pepy]

you say misleading? how surprising

[threatofrain]

> Also, it looks like you get out of Lambda School debts via bankruptcy, which you don't with regular college, so that's... an improvement?

That was always the case, Lambda School just communicated otherwise to students.

[TheRealPomax]

In this particular case? It's an HN item, it's going to drop off the front page in <12 hours, so... not commenting would have been far more sensible than to try to PR-convince a cynical tech crowd.

[threatofrain]

> Also, it looks like you get out of Lambda School debts via bankruptcy, which you don't with regular college, so that's... an improvement?

But if you lie about it, then...

[rajacombinator]

Not to mention that Lambda School is an attempt to actually align the incentives of school and students, which is the main problem with educational financing today. Wrong target to pile on.

[sugarwater]

As a student that went through the program, I question if their incentives were aligned.

During the middle of my enrollment at the program (Sept 2020), the school suddenly dropped all notion of grading, code review, and attendance, let alone the length of the program. It remained this way for 3 months, 50% of the length of the program.

This is a broad description of the changes, but I want to emphasize that the changes were terrible, _many_ students complained, and the school essentially whistled with fingers in their ears.

[hluska]

Are you doing okay now?? That sounds awful...:(

[sugarwater]

I graduated at the end of February and am still job searching.

In the meantime I have a part time job and working through the MIT Computer Science OCW

[michaelbuckbee]

I'd agree with you except that in this case it seems like the "deception" was actually working against Lambda school.

Previously -> if you go bankrupt you still owe us.

Now -> if you go bankrupt you don't owe us.

On the face of it this seems like it would make Lambda school _more_ attractive than less.

Note, the clause in question is "qualified educational loan…subject to the limitations on dischargeability contained in…the United States Bankruptcy Code."

[marcinzm]

It's not about being attractive, it's about ex-students not declaring bankruptcy because they think it won't remove their lambda school loans. Thus lambda school keeps getting money from them instead of getting nothing after they decide to declare bankruptcy. That clause was, in my eyes, clearly designed to discourage students from exercising their ability to clear debts via bankruptcy.

[nrmitchi]

I've seen this point made elsewhere too, but I'm not sure I understand it.

The ISAs are, as far as I know, capped at 30k, and only apply if you're making 50k/yr. I can't imagine a situation where someone's decision of whether or not to declare bankrupcy comes down to the 30k-max ISA; either it's the majority of your debt, and you're making >50k/yr, or it's a small amount relative to your other debt, in which case you should proceed anyways.

[pseudalopex]

Or you're making less but think you could make more eventually.

[narwally]

Yep, it's about "Human Capital: The Last Unoptimized Asset Class" <- the title of an actual internal memo they wrote.

[ghufran_syed]

what’s wrong with that? is it better that people can’t develop their human capital, or is it better if people have a variety of ways to finance education to develop their human capital? The status quo is government student loans to finance education, which are generally NOT dischargeable in bankruptcy, AND must still be paid even if if you didn’t graduate, or get a good job afterwards? Isn’t the income-share agreement at least “less bad”? I’d be interested to hear your thoughts on how better to address the problem? If the government was involved, I personally think the best way would be a graduate tax of x%

[judge2020]

Maybe more attractive, but only in the 'defraud them by going bankrupt after getting the certification' sense, where they educate the students without getting paid in some cases.

One of the biggest reasons student loans can't be forgiven in bankruptcy is because, after school, chances are the graduate has zero assets and can go bankrupt with the only downside being destroying their credit for 7 years. Whether or not you think this is justified or fair is up to you, but the situation before this ruling simply [de-]elevated Lambda School to the same playing field as other educational institutions - the only difference being that those institutions don't offer student loans themselves.

[anchpop]

I wonder if the accusation is that they were trying to mislead people into not understanding that bankruptcy is an option, in the hope that they’ll be less likely to default? Still doesn’t really seem that serious to me. Nobody who was under the impression that the loans could not be discharged by bankruptcy will be disappointed to find out that they can.

[nicklecompte]

> they were trying to mislead people into not understanding that bankruptcy is an option

It’s exactly this. Lambda School customers tend to be young and financially ignorant, with very few resources. If a graduate is in a position where, say, they can’t find a software job, they could be functionally bankrupt, and their dwindling income/savings will still be going towards outstanding Lambda School payments.

From this perspective, it’s extremely shitty for LS to deceive students that they would have to make the payments, with no legal options, even if they were stressed about rent and groceries.

[spullara]

You don't have to pay if you don't have a job so I don't think this comment is correct.

[tims33]

I'm sure the previous terms made the loans much more attractive to lenders which is helpful to Lambda. It would be most useful to understand who created the terms in the first place.

[mbesto]

> On the face of it this seems like it would make Lambda school _more_ attractive than less.

Technically sure. On the face it tells me something about their branding - that their offering may be more deceptive than I might realize. Especially since its a new economic model for education, the customer probably hasn't thought through everything, so trust is important here.

[LMYahooTFY]

You seem to not be aware of how Lambda School operates at all.

It in no way resembles the college financing model, and in fact the purpose was to succeed in precisely the way it does not.

[wakeywakeywakey]

Reminds me of the 'Human Heater' pitch from the Silicon Valley show [1]

[1]: https://www.youtube.com/watch?v=Di3fPj0pUbQ

[judge2020]

> It has not been shown conclusively that microwaves (or other non-ionizing electromagnetic radiation) have significant adverse biological effects at low levels. Some, but not all, studies suggest that long-term exposure may have a carcinogenic effect.

He might not be entirely wrong. They're still not going to sell any to the general public, though, especially if it is carcinogenic.

https://en.wikipedia.org/wiki/Microwave#Health_effects:~:tex...

[Pyramus]

I've done and seen quite some 'spin' on things as an entrepreneur, but this complete lack of humbleness takes the cake for me.

[maximilianroos]

I'm inclined to be on your side — the sum total of Lambda's impact on the world is likely highly positive, whatever happens in the details.

But that makes this response confusing — I was hoping to see a refutation of the regulator's claims or, failing that, a thoughtful discussion on what went wrong.

Is the regulator accurate? If so, were the statements significant? If so, what happened?

[vmception]

The response isn't confusing when the first duty of the settlement is to notify existing students and everyone else that the bankruptcy dischargeability provision language is not accurate, and thats what they said in the response

gigglesnort

[rexreed]

The above response is a great example of spin, or if you prefer, this nice euphemism: https://idioms.thefreedictionary.com/polishing+a+turd

[nickpinkston]

What do you think the material impact on students of this will be?

ie Was anyone harmed, or is this just preventative? Seems like the latter, but just want to make it clear for people.

Was it previously a gray zone on the dischargeability? Did something change in the law? Was Lambda just being cautious in saying it ::may not:: be dischargeable? Something else?

I remember hearing that ISA case law isn't very deep, so I can imagine that there may be more gray zones.

[akanet]

Austen call me we can work through this gaffe