San Francisco Coding School Has Novel Tuition Plan

Lambda School teaches online coding for free, but expects students to pay 17 percent of their income over two years, capped at $30,000. The income share agreements are new, but unregulated, according to experts.

by Carolyn Said, San Francisco Chronicle / April 15, 2019
Learning to code. Unsplash/Nesa by makers

(TNS) — Patrick Thompson, 25, was working minimum-wage jobs at Costco and the post office when he stumbled across a YouTube video about a nine-month online coding school that didn’t charge tuition. Instead, Lambda School students would pay 17% of their income over two years, capped at $30,000.

“It sounded really good but also like a scam, maybe too good to be true,” said the San Jose resident, a single dad of two. But after researching Lambda, it seemed legitimate, so he enrolled last summer.

During the program’s second half, Thompson worked closely with a career counselor and started sending out several job applications a day. By the time he graduated last month, he’d applied to 532 companies, gotten 40 interviews, landed 32 second interviews — and had four job offers. He will start this month as a software engineer at Sustainable Capital Finance in San Jose, making $110,000 a year.

“That salary is bit of a leap from $20,000 a year,” he said wryly. “I’m very thankful for Lambda; it helped me accelerate myself without having to go into major financial debt.

Coding boot camps entice students with the lure of lucrative programming jobs after just a few months of immersive education. But there’s no way to verify their job-placement claims, although the industry is seeking to standardize the reporting of such information.

Now some coding academies, such as San Francisco’s Lamba, are letting students attend for free in exchange for a cut of their future earnings. The plans, called income share agreements, are supposed to ensure that schools help graduates find jobs, although some opponents fear that they are a form of indentured servitude.

Michael Lux, an Indiana attorney who founded the Student Loan Sherpa website, said he worries about income-share agreements because they have little oversight. Some four-year colleges such as Purdue offer them, but they’re more common at unaccredited schools like coding academies that are ineligible for government student loans.

Still, Lux said Lambda’s approach seemed excellent because it caps the total amount ($30,000), length of repayment (two years) and monthly payments (17 percent of gross income). “Anytime you can provide more access to education for people, that’s a good thing,” he said.

That’s the view of Austen Allred, 29, Lambda’s CEO and co-founder, who lived in his Honda Civic when he first came to Silicon Valley.

“Our goal is to open up access to world-class education and job placement to everyone,” Allred said. Lambda, which went though the Y Combinator incubator in Mountain View, now has $49.65 million in venture backing and is eyeing expansion into other fields, such as nursing.

Started in 2017, the online-only school allows students to pay $20,000 up front. But just a handful choose that option, Allred said. Most graduates are on income-share plans and make payments only if they find a coding job that pays more than $50,000 a year. Of 300 graduates so far, 85 percent found jobs within six months, Allred said. If graduates don’t find a job within five years, their debt is wiped out. If they lose a job, their payments stop until they find another one.

“We are structured so if students are not successful, we are not successful,” he said. “It forces us to function differently; our incentives are clearly aligned with the students.”

For instance, he said, while many coding schools have sales teams to recruit students, his sales people spend all their time talking to companies about job opportunities. Lambda works with an advisory committee of employers to constantly revise its curriculum to keep pace with in-demand skills.

Now Lambda is expanding its income-share program, offering both free tuition and a $2,000 a month stipend to cover living expenses during the nine-month program. The repayment on that will be 10 percent of salary over five years, capped at $50,000.

Texas resident Alexis Carr, 25, who has an undergraduate degree in biomedical engineering, starts the stipend program this month.

“Otherwise I was looking to get jobs at fast-food restaurants and call centers” and study part time, she said. “The stipend helps me really immerse myself in the curriculum.”

Compared to the “scary number” she owes on student loans for her university education, Lambda’s income-share agreement seems “way cheaper,” she said.

Lambda seems to be taking a big risk by placing its financial future in its graduates’ hands, but the school has taken steps to mitigate that. It says it accepts only 5 percent of applicants — almost as selective as Stanford (4.3 percent) or Harvard (4.6 percent).

Applicants must take a month of pre-course work. These free classes help Lambda assess their ability and work ethic, and students can determine if they’re really committed.

Lamba currently has 1,300 students enrolled and plans to train 3,000 this year.

The school takes some creative routes to job-hunting. Allred sometimes tweets about job candidates, offering incentives (swag or a cake) for interviewing them or a bonus for getting them hired. Last year, he tweeted a YouTube video of four students’ final project, a point-of-sale/reservation system for restaurants.

Sunnyvale’s Clover Network, which makes similar products, saw the video and bit.

“The project was elegantly written, had a lot of thought behind it, and fit our mission of providing better merchant experience,” said John Vormbaum, Clover head of recruiting. He hired all four starting in January at six-figure salaries and said they’ve done great work.

Clover plans to add 200 engineers this year, and Vormbaum figures he can find about 10 percent of them from Lambda. While acknowledging that a nine-month course doesn’t compare to a four-year computer-science degree, he said that people with that education can quickly become functional engineers and often bring a cultural dimension because of their differing life experiences.

“The recruiting landscape in Silicon Valley is changing,” he said. “As demand for engineers grows, we’ll be even more dependent on nontraditional channels. Lambda leads the pack.”

About 16 out of the 100 or so U.S. and Canada coding boot camps tracked by Course Report offer income-share, said Liz Eggleston, co-founder of the site, which offers information for students choosing coding boot camps. (Lambda is among its paying sponsors.) She cautioned that it’s important to read the fine print and make sure total repayment is capped.

“In a culture of student debt and education not being outcomes-based, income-share agreements are an appealing option for students who don’t have $20,000 or more to spend up front,” she said.

Nathan Thomas, 31, who lives in Angwin, started at Lambda in the fall and is now taking a three-month break from studying to act as a section lead, overseeing 18 project managers (similar to teachers’ assistants), who work with about 160 students.

Thomas, who has an MBA, had worked in health care administration but wants to transition to financial technology.

“I’ve learned more at Lambda in two weeks than I taught myself in two months of self-study,” he said. “It’s been a phenomenal experience.”

©2019 the San Francisco Chronicle. Distributed by Tribune Content Agency, LLC.

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