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Because when the loan is forgiven after 20 years it looks like income. So you have to pay tax on your forgiven loan. If Lambda School can’t teach you well enough that you get and keep a good paying job then they take the loss not the tax payer.

Also: advocating for keeping the old system by saying this new way is not different is the least Hacker News things I’ve ever heard. The student loan crisis is an existential crisis for America. More schools should adopt the Lambda School approach, America would be much better off.

The current model is no different to unscrupulous bankers selling loans to Wall Street or Fannie Mae: they just lure students to the school helping them fill out student aid and loans and then give them subpar educations with curriculum being taught like it has been for years but they don’t care to change or innovate because the school has already been paid by an entity — the US education department who has deep pockets.

It doesn't just _look_ like income. It is income. If I give you $100 as a loan then change my mind and say 'you can have it', you just made $100.

What if we turn it into something a little more analogous, and I loan you $100, and you use that $100, and I never asked for it back, but 12 years later go "actually you know what, never mind about paying me back", that's not $100 you now have. That's $100 you had 12 years ago. But we also need to make sure to keep the analogy in the same ball park, not the same county, so when we're talking $100, the tax on that isn't going to bankrupt you and it's a bad analogy. Let's up that by a factor of 500 instead: when we're talking a full student loan, if I say "actually, keep it", I literally just bankrupted you for kicks, and you should have had some kind of legal protection that prevented me from ruining your life on a whim.

That can't be right. You're saying that going from $50k in debt to a student loan lender to $12k or so in debt to the IRS is a bad thing? Why do you care so much about who owns your debt that cutting it by 3/4 is a loss? Not only that, but now your debt can be eliminated in bankruptcy (a unique feature of student loans is that they are immune to bankruptcy). This looks like an altogether enormous win.

And how long, exactly, does the IRS allow you to pay off that $12k? Because if it's "a few months", and really even just "a year", you're proper fucked. Not everyone gets a nice $60k/yr job after their $50k loan investment, and having a $50k loan over 15+ years is manageable, whereas $12k in one will ruin you.

6 years is standard, plus the time between the forgiveness event and filing, which gives you another 3-15 months or so. Down to 3 years if your balance is <$10k.

And as I mentioned before, if it was too short you could declare bankruptcy, which is an option you don't have with student loans. My point that even in the worst case you're in a better position than before still looks valid.

I don’t care about who owns it. But paying income taxes on 50k of forgiven debt would be hard for me.

Sure, it might be hard. But my point is that it can't be harder than paying the debt itself. Debt forgiveness does not leave you in a worse position unless your marginal tax rate is more than 100%, which is vanishingly rare.

What? If I make 80k a year having the IRS think I made an extra 50k puts me in a new tax bracket

The difference in your tax bill between $80k of income and $130k of income is $15k. This is much, much less than $50k. In this case the loan forgiveness has increased your net worth by $35k. That's a lot of free money that you're insisting is actually a curse.

But it's only a new marginal rate, so it still only applies to those extra 50k

The average American doesn’t have the savings to pay that extra amount is what I’m getting at. And I’m average.

Why would you have to pay it all immediately? The IRS is very helpful with payment plans (this is obviously better for them than demanding full payment and then watching you wipe away the debt in bankruptcy). Here are some details [1] - fees to move your owed taxes to a long-term payment plan (essentially a loan) range from $31 to $225.

And if they aren't, personal loans are possible. Or even bankruptcy! The common thread between these options is that they're better than being $50k in non-dischargeable debt.

[1] https://www.irs.gov/payments/payment-plans-installment-agree...

No I wouldn’t want to owe the entire amount of the loan but if I can’t pay off the loan or the forgiven amount I’m screwed either way. Just in the latter situation I’m relatively less screwed.

You appear to be pretty attached to the idea that IRS liabilities are worse somehow than student loan liabilities. Other people seem to be trying in good faith to understand why you think this.

IRS liabilities can easily be repaid over long time scales, usually at much lower interest rates than you can get on unsecured loans such as a student loan.

A $50k non-dischargeable loan, at a relatively high interest rate, with a flexible repayment timeline does not appear, to me, to compare favorably with a $15k IRS liability, dischargeable in bankruptcy, at relatively low interest rates with a similarly flexible repayment timeline.

Back to the point: Lambda school and schools like it are the for profit schools we needed. And I hope the model scales to other industries and that education is flipped on its head because of it.

Would you rather owe the entire amount of the loan?

>they just lure students to the school helping them fill out student aid and loans and then give them subpar educations with curriculum being taught like it has been for years but they don’t care to change or innovate because the school has already been paid by an entity — the US education department who has deep pockets.

Total tuition loans outstanding is around $1.5T. Total US Education Dept annual budget, 70B. Median length to pay off student loans is around 20 years. 30% of people graduate with no debt, and of the remaining, median debt is around $30k, the cost of a decent car, and a fraction of what the same people will pay for a house.

Adding the entire Ed budget for the past 20 years is no where near the amount of loans outstanding. And in fact they lend only a fraction of their budget to student tuition.

Thus your claim that the US Ed dept is paying at the end of the day is mathematically impossible. The debt is from private lenders, who do have incentive to ensure borrowers pay back.

> The debt is from private lenders, who do have incentive to ensure borrowers pay back.

Not necessarily. Private banks issuing federally-backed student loans want you to default, because then they double their money. See here: http://www.collegescholarships.org/research/student-loans/

Your link doesn’t show how a defaulted loan is more valuable to a private bank than a performing loan. It would be more accurate to say private banks are relatively indifferent to the performance of a loan. (They’re actually marginally incentivised to collect performing loans, since that is a cross-selling opportunity.)

> Private banks issuing federally-backed student loans

Don't exist. They used to, before 2010, though (the propagadagraphic you link obliquely alludes to that with it's reference to the “Obama changes” that it does not explain, perhaps because they render the flowchart entirely irrelevant.)

Loans are a mix of subsidized and unsubsidized, sure. But the issue is that the incentive is that of any loan owner: repayment of the loan. With Lambda School the incentive is making better, more employable, engineers and the loans will pay themselves off. What good does it do the person and the economy if a bunch of people are straddled with debt for 30 years for a degree they can’t use being hounded by creditors while the universities remain the same? In the end there’s a network of entities that all own debt that will never get paid back, debt that is for all intents and purposes subprime. Remind you of anything?

The DOE budget doesn’t include disbursed student loans. These days, the DOe disburses over $120 billion in loans per year. Almost all student debt ($1.33 trillion of $1.5 trillion) is Federal government issued.

Do you have a source? Every one I find states the numbers I posted above, no where near your number. Total federal and non federal combined is currently around $100B annual.

I guess my number is a bit dated. It's $95 billion in federal loans in the most recent year, but it peaked at $117 billion in 2010-2011. https://trends.collegeboard.org/sites/default/files/2017-tre... page 9. Still, the DOE budget cannot reflect that since it is much less.

Non-federal loans account for 11% of loans: https://trends.collegeboard.org/student-aid/figures-tables/t....

In a word: incentives.

It’s not about the payment structure alone, it’s about a school that is incentivized to make its students successful. IBR is just taxpayers swallowing the bill when schools fail.

Yes, it's simple: Lambda School has skin in the game. Traditional universities have no skin in the game. Hence why we have a rent-seeking university system that hoovers money away from hard-working parents (and students), while putting those same parents and students at financial risk.

But then such schools that predominantly work on ISAs, will pre-select for good students, who are most likely to succeed and also for industries where the compensation is higher. Remainder (which is arguably 90%+) of the students will still be at the mercy of other schools + taxpayer.

It seems, this just provides one more payment option to students who are likely to succeed anyway and a refreshing business model for schools that move early into the space.

It doesn't address the real problem with schools i.e. making the 20th%le student successful and not a taxpayer burden.

> But then such schools that predominantly work on ISAs, will pre-select for good students, who are most likely to succeed and also for industries where the compensation is higher.

That still sounds far better than the current system of selecting for the most popular (instead of valuable) subjects that draw in the most clueless students to get indebted for life for something they are unlikely to succeed in anyway.

> It doesn't address the real problem...

What does?

Exactly. With a federally garanteed loan no less! The school has incentive to take you and cater to your fanciful wim major, its free money to them up front and your problem (repayment) later.

> But then such schools that predominantly work on ISAs, will pre-select for good students, who are most likely to succeed and also for industries where the compensation is higher.

That actually sounds like a good incentive structure to me. Most people shouldn't study something that will not give them some advantage (which these schools would select for).

If you struggle to make ends meet it wouldn't be a reasonable decision to study something unprofitable in the first place. I wish it was different and everybody could invest an infinite amount of time to learn what they are interested in, but in a resource constrained reality that's not possible and individuals have to make decisions that are advantageous for them.

By definition and practicality, schools and fields of work will remain a pyramid i.e. at any given time, there will only be a few fields and colleges that "give advantage", being able to absorb only a fraction of students by competition. e.g. field of programming can only absorb a million odd engineers in next few years. (Ironically, when it absorbs more, it will no longer remain a field with high wages).

The remainder of the iceberg hence, will need to go to other lower parts of the pyramid. ISAs won't do anything for that. Only the government will. And the Govt does it for us, with our money, because not providing education to lower levels of pyramid will result in nothing but societal anarchy.

ISAs hence shouldn't be hailed as panacea for education loans which is what marketing makes us believe. The only advantage of ISAs, is that they unlock better education for some "motivated students" (for lack of an accurate phrase) from underprivileged circumstances. That's not a trivial advantage for those who qualify. I don't know what that % of population is, but it can't be much.

In any case, however small, that number sure seems enough to build a business around it with some feel-good marketing (like this article).

Be aware of IBR and the promise of loan forgiveness. These are relatively new programs and the first batch of people taking advantage are actually people who work in public service/non profit (whose loans get...or are supposed to get forgiven after 10 years).

There are significant numbers showing the loan servicers engaged in fraud to prevent the forgiveness. One of the major loopholes is on an annual basis when income documents are due, the loan servicers would take extended periods to “review” the income docs and place the loans in forbearance for a month. Then when forgiveness time came they were denied for not having made payments (through no fault of their own) for 120 consecutive months essentially resetting the clock every year.

Not to mention at any given point these programs can be axed, which I’m sure they will be if there were ever a significant portion of the population who would actually qualify for the forgiveness.

Lambda School's ISA is forgiven at 5 years if you don't get a job that pays $50k+ in the field you studied.

So you very possibly could pay Lambda School $0.

> The article doesn't really have information on the Purdue system other than saying that it might cost high-earning students 250% of the price of their education.

tl;dr; on that is you borrow a certain amount (that you choose, but is capped by the program). In exchange, you pledge a certain percentage of your income every month for a certain number of months (5-10 years generally) [0]. The maximum amount you'll repay is capped at 2.5x the loan amount (i.e. if you borrow $10k, you'll repay a max of $25k).

Practically speaking, the gist of the program is that it's good for students with middle income career outlooks, but terrible for students with high income career outlooks (i.e. talented CS majors) since you'll end up paying more than a traditional loan.

[0]: The percentage pledged varies by the loaned amount and major. The number of months seemingly only varies by major. You can play with the calculator here: https://compare.vemo.com/

Purdue's program: https://www.purdue.edu/backaboiler/index.php

they may have this out...Indiana public colleges have a with HS graduation take an advance test out that gives up to 2 years college free to those HS students from Indiana..so some are looking not at 4 years at almost $50k but $25k

> The big issue is for universities is how they would handle marriage.

I don't see why this is an issue at all. If the college claims that "finding the high-income person you will marry" is one of the reasons to attend that college, then they should please return to the 1950s (or earlier!). If they DON'T, then the repayment should be based on the individual's income, regardless of their spouse's income.

Does this mean that a college risks getting paid very little by a graduate who ends up becoming a stay-at-home spouse? Sure, but that's part of the risk. A 4-year college wishing to introduce such a program can always take a less-than-complete approach and still charge some minimal tuition up front (presumably in exchange for a smaller slice of "lifetime" earnings).

Except this leads to an incentive for sexist bias in admission since women still dominate the "stay at home spouse" category. Finally, especially for undergrad, many DO go there for general education/becoming more worldly, even if they have no intention of joining the workforce.

When a couple marries, I think they should realize that they are to face the world together, and this means repayment of educational expenses of both partners.

I've heard professors argue that college as a physical location is only useful for meeting people, and the learning itself was not even relevant. I don't think this is a 1950s outlook.

If I understand correctly, at least at elite universities, that's about meeting contacts, not so much about meeting spouses.

Meeting people is useful for education & learning.

That's a pretty easy system to game. Got loans you can't afford to repay? Quit your job and claim to be unemployed, so you can stop paying your loans and live off your spouse's income.

A lot of people who can't pay their loans are in low-paying jobs they don't like, so this would be a very tempting option indeed.

Financially, it would be throwing away a dollar to try to save a couple of dimes. There is no scenario where you would be better off by doing so.

But if the low-paying job is crummy enough, maybe you don't care about strict financial calculations...