[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.

[skellera]

That’s giving way too much credit. I’m sure if you asked 100 people if ISAs from a bootcamp were the same as government backed student loans, you’d get pretty close to 100 “no.”

[bpodgursky]

Private student loans are exempt too...

[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.