Today, Lambda School resolved an administrative action with California’s new Department of Financial Protection and Innovation (DFPI). Most importantly: we will continue to offer students in California our incentive-aligned tuition, and stand behind our student-friendly model. We also agreed to remove a sentence in our California contract, take a fresh look at our marketing to ensure it continues to be clear about how Lambda School works, and do a deeper dive legal review.
DFPI, we think, represents the first financial consumer protection regulator to consider and resolve a matter on incentive-aligned tuition, where students pay tuition only when they secure a job they trained for. First, a little background on our model, and why this matters.
At Lambda School, students do not pay tuition upfront. Instead, they attend Lambda School and learn web development or data science. Then, when they secure a job making $50,000 or more, that’s when they pay tuition to Lambda School as a portion of their new income. Payments are lower if they make less, a little higher if they make more. If after attending, a student doesn’t secure such a job leveraging the education they received here at Lambda School - they just show us that, and payments either never kick in, or stop automatically if they leave or lose the job.
We call this model incentive-aligned tuition, and it makes us obsessed with student outcomes. We hold ourselves accountable to deliver results in the form of job readiness, and believe to our core that this model of education is a great way to increase access to life-changing career opportunities. Outside of California, we offer incentive-aligned tuition in the form of an income share agreement (ISA).
In California, Lambda School’s ISA didn’t fit neatly in the framework of existing law. The reason: current California education law was read to require an exact, fixed amount of tuition that every student would pay. At Lambda School, some students pay less than the full tuition amount, or some don’t pay tuition at all if they end up not securing a job they trained for. We were disappointed last year’s legal analysis meant we could not continue to offer new California students our ISA. But we believed in our students and our unique ability to help them succeed, and we didn’t give up.
Instead, we spent over a year working with California’s private education regulator, the Bureau for Private Postsecondary Education (BPPE) to solve this question. Last year, that work culminated in a big win for California students: BPPE approved our proposed alternative to the ISA: an incentive-aligned form of a Retail Installment Contract (RIC). Like the Lambda School ISA, the Lambda School California RIC allows students to pay tuition only when they are hired, and as a percentage of income so long as they are working in a job making $50,000 per year or more. Unlike an ISA, under the California RIC, students keep paying that income share amount until they reach a specific dollar amount.
We launched the RIC last year because we believed students in California would prefer that, to the alternatives of student debt or worse, loss of access to education to gain technical skills. California students who enrolled since the introduction of the RIC are coming up on graduation now, and we look forward to helping them secure and succeed in jobs. As far as we know, we are the only school in California today offering incentive-aligned tuition.
So what is new now?
DFPI reviewed our California RIC agreement draft and pointed out a line related to what happens in the event a student declares bankruptcy. We gladly took it out when DFPI indicated it was not required. DFPI also expressed concern that if someone sees historical marketing indicating Lambda School is “free until you get a job,” they might not fully understand that there is tuition for Lambda School, it’s just paid after the student obtains a job making $50k.
We agreed to stop using the “free until” phrasing and to review all of our marketing materials for anything that could be read differently. We believe our model is a superior way to prepare students for careers, and we want students to understand our incentive-aligned model because incentive alignment and the accountability it requires are what make Lambda School who we are and what ultimately make it such an appealing model.
And finally, we agreed to continue our legal and advocacy work on incentive-aligned tuition and continue to look at legal angles around how our student-friendly model operates under existing law. We feel good about this work and are glad for the accountability as we continue to offer our incentive-aligned tuition in California and across the United States.