For the past year the Lambda team has been working towards a major goal: becoming the first school in California approved to offer Income Share Agreements (ISAs) by the California Bureau for Private Postsecondary Education (BPPE). At a time when unemployment in California is reaching historic levels and health concerns restrict access to learning and to work, we believe Lambda School’s model of online instruction and educational financing expands educational access to students who would otherwise be excluded and increases economic opportunities to find higher paying jobs.
Earlier this week, we learned our latest submission to the BPPE was not accepted. This is the latest step in a long process, and so while it’s not the decision we hoped for or expected, this process is far from over. There will be no interruption to operations or support for students in California and school will continue as normal. We’re committed to working directly with BPPE to solve the issues they raised.
The good news is that the BPPE’s response had nothing to do with the quality of our programs, our educational model, or anything related to the school itself. The decision was entirely related to the way we help students pay for their education using Income Share Agreements (ISAs).
Unlike traditional student loans, ISAs are fundamentally designed to protect students. ISAs rewrite the economics of getting an education in that they have no upfront cost and repayment is tied to a student's post-graduation wage. While the monthly payment for typical student loans generally remains fixed regardless of your employment status or income, ISAs automatically adjust based on your current salary –– underemployment protection is already built in. Moreover, with Lambda School’s ISA, if your annual income drops below $50,000, your ISA payments are automatically suspended until you’re back above that mark.
The vast majority of our students choose the Lambda School ISA and so pay us nothing up front. We bet on the success of our students. When students succeed, we succeed. If our students fail, we fail. We did a poll of our students six months ago — 93% said they would not have attended Lambda School if the ISA wasn’t an option. Fundamentally, ISAs make Lambda accessible to students looking to transform their lives.
The same dynamics that make ISAs so appealing to students are the ones that make ISAs unattractive for regulators to fit inside an existing regulatory box: ISA payments vary based on your post-grad income, and Lambda does not obligate students to repay a fixed amount for courses and placement services. That means some students pay less and some pay more, but no one ever pays over the $30K cap— and if a student can't find a job that pays over $50K within five years of graduation, they pay nothing. That’s why it's so hard to compare ISAs with traditional financing.
We wanted to share this publicly because this issue is much bigger than just Lambda.
ISAs are a groundbreaking idea that mitigate financial risk for students, lessen the upfront burden of enrolling, and align the incentives of school and student. Beyond online schools like us, traditional institutions like Purdue and University of California San Diego Extension offer ISA options as an alternative to student loans.
Ultimately, if ISAs are to become a truly sustainable, durable, and scalable financing option for the broader educational landscape to adopt, ISAs need regulation.
By working with regulators head-on and advocating for legislation on the federal level, we’ve made our position very clear: we want widespread ISA regulation. ISAs have too long existed in a legal gray zone, and approval would set a crucial precedent for better student protection, broader adoption, and greater access to education. That’s why we’re pushing so hard.
Access to education and a path to a better career is quite literally life-changing. It’s the core of what we do every single day. We believe in a future in which ISAs are a consumer-friendly, ubiquitous option for all students. We’re not going to stop working to make that happen.