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  - zero interest
  -  {snip} you end up having to pay 150% of the principal loan (assuming you have a high enough paying job for long enough within those 5 years)

Those two things don't line up, and repeating the 'zero interest' line in an edit doesn't change that. If your repayment is 150%, you've paid interest.

It doesn't really behave like interest though: the amount paid doesn't depend on compounding or your repayment schedule.

That it doesn't compound doesn't mean it's not interest.

That just means it's not compound interest.

It’s a fee, not interest. Interest is charged over time (either compounded or uncompounded, either way you pay more interest if you take longer to pay off the loan). Here they’re charging a onetime 50% fee.

I think the point here is that "zero interest" isn't particularly compelling when the cost of credit is being driven up (to exorbitant levels) by another mechanism. An equivalent loan with a 5-year term would have an interest rate of almost 18% and in this case you don't have the option to save money through early repayment.

Debit is not just big digit, it is an ever deepening well. There are many people that have paid ten of thousand of dollars of their student loans and still saw the total due amount increase.

A loan with a very reasonable 5% overall interest if paid on time can have unbounded interest if paid late enough.

The student dept crisis is dominated by the latter kind of situations.

(still yes, it is zero compound interest + 50% fixed interest)

> There are many people that have paid ten of thousand of dollars of their student loans and still saw the total due amount increase.

The problem is a lack of financial literacy education on one side and a lack of career options for decent-paying jobs on the other side - a lot of office jobs these days require college degrees, and not everyone can work in the trades or join the military.

Personally, I believe that all of this is actually designed the way it is to make money for the banks handing out student loans.

To be pendatic, the fee is just interest that is compounded exactly once.

Instantaneously on contract creation and irrespective of loan term / repayment / etc.

It's such a non-standard contract that the terms loan and interest are kinda fuzzy

> That just means it's not compound interest.

that's not true. simple interest is calculated on the remaining principal, thus it does continue to accrue with time (which this "zero interest 50%" does not)

compound interest means interest calculated on the remaining principal and on accrued interest.

https://www.investopedia.com/ask/answers/042315/what-differe...

Important distinction to make, most people just think "more money means interest" but the mechanics of the two financial instruments differ and this is the entire selling point for these ISAs, and the reason why one may be a good / bad idea in a situation.

> - tuition was definitely overpriced

IMO, this is the essence of why ISAs have become so scammy.

ISA-based bootcamps are doing a fantastic job of competing against the perceived cost of a college education. We've all seen news headlines about how private college tuition is reaching $200K. What most people miss is that almost nobody pays full price for college. They have a high headline number for the wealthiest families, but virtually everyone else pays a fraction of this cost or some times nothing at all.

People see the "$30K" price tag for Lambda School and other programs and assume it's a steal, yet most in-state tuitions are in the same range and provide substantially more education.

I've also been completely stunned by how bad some of these programs are. I took the bait about Lambda School back when PG was promoting it all over Twitter, but it has been a terrible disappointment for the small handful of bright students I've known who went through it. Maybe it's changed, but at the time it felt like they were paying $30K of future earnings to have an inexperienced person point them to simple tutorials that they could have found by themselves online. They were basically paying for the certificate that said they completed the program, which is ironically the stereotype that people were using for 4-year colleges at the time.

I totally agree. A lot of people talk about ISA being scams and I basically agree. But I don't think it's a scam in how they assume. If you do your research most ISA agreements are good about being more straightforward than most other types of loans. The scam is usually solely in the principle amount being charged.

That being said, I think ISAs are actually partially successful in that they provided a way for someone broke like me to try something and not have to worry too much about the impact if it doesn't end up succeeding. I wish people in my position had more negotiating power to avoid being overcharged, but that's not a problem unique to ISAs

To put it another way, it’s a high risk loan from the perspective of the ISA lender — which they offset with a high premium to get around the adverse selection are problem. It’s basically a mirror image of the problem that insurance providers face.

> People see the "$30K" price tag for Lambda School and other programs and assume it's a steal, yet most in-state tuitions are in the same range and provide substantially more education.

on the other hand, the time cost of a bachelor's in CS is much higher than that of an 8 month (?) bootcamp. four years is a long time to spend treading water wrt employable skills.

I do feel that the degree is better long-term if it's at all possible. but that's not realistic for everyone. if at the end of the bootcamp you get a decent job that you wouldn't have otherwise, that seems like a good deal. if not, you're out a lot less money and time than flunking out of undergrad halfway through.

> four years is a long time to spend treading water wrt employable skills

Internships during school can be a massive salary increase for many people. Even 25+$/hour is quite a large pay bump for a large chunk of the population, and many internships go well past that.

good point. getting an internship for summer and maybe fall/spring part time is a good way to defray the opportunity cost of not having a full-time job for four years. I think you have to be a pretty strong student and well organized to get an internship before junior year though.

> four years is a long time to spend treading water wrt employable skills.

Only if your sole goal in life is the pursuit of money. Most of the people I know enjoyed their time at university, they got to learn in a structured manner about philosophy and other interesting topics while having freedom to indulge in intellectual curiosity. Life isn't a race to get on a career path.

I do agree that flunking out is probably the worst outcome though, so if academia isn't for you don't feel pressured to pursue it - it certainly won't make any difference in terms of your job prospects by the time you're 30 as a developer. We just need to stop treating university as a vocational training session.

People joining boot camps are often later in life than your typical college student and time is at a greater premium.

> We just need to stop treating university as a vocational training session.

Is it treated as a vocational training session? I thought university was more about signaling some combination of socioeconomic status and ability to learn/motivation. More selective schools and more difficult coursework (such as hard sciences or engineering) signal a potential employee who is able to learn and manipulate the system they are put in, as well as possibly bringing useful connections.

> Life isn't a race to get on a career path.

Presumably life isn't a race at all, which makes you wonder why everyone is in such a rush to attend university when they are young and don't yet have the resources to pay for it. It will be still be there when you are older and the pursuit of knowledge will still be every bit as enjoyable. It may be even more enjoyable as you then have the life experience to appreciate it. Retirement is meant for these types of hobbies.

> Presumably life isn't a race at all, which makes you wonder why everyone is in such a rush to attend university when they are young

It’s the networking opportunities (i.e. “the college experience”) which suffer as the age gap grows between you and the other students. Since networking is the bulk of the value of university, your age during attendance is of disproportionate consequence. I’m speaking from personal experience here — going into a post-grad program, it was immediately obvious to me that the age gap would act as an all but uncrossable chasm. And I’ve seen this chasm in action in undergrad, where it was even more pronounced.

Simply put, university is a lot harder to justify when a significant age gap exists. To your point, maybe most people should wait a few years before attending university, but they don’t, and those who’d otherwise prefer to wait before starting university — which is doubtlessly a wise move for some — have to risk their college experience to do so.

> It’s the networking opportunities

The move to taking university online, and the masses of students following, through the COVID period suggests not. Online university does not provide any unique networking opportunities that aren't already available through every other online service, HN included.

I don't want to spend my whole life waiting for a retirement that might never come - I might die, my mental faculties might degrade, even if everything went right I might still burn out.

If I thought I could take a three- or four-year break to study in my thirties or forties without it hurting my career I absolutely would. But employers seem to be suspicious of that kind of thing (unless it's something like a 1-year MBA). So if I want a sabbatical without hurting my earnings too much, a college degree seems like my best option.

> What most people miss is that almost nobody pays full price for college. They have a high headline number for the wealthiest families, but virtually everyone else pays a fraction of this cost or some times nothing at all.

You're using this statement to claim that college is not actually expensive but I'm pretty sure it supports the opposite claim. Anecdotally, I was accepted into a range of universities and ended up picking ~ the worst one because that was the university which gave me the best scholarships.

If college is extremely expensive then it makes perfect sense that the only people paying full price are the people who have a lot of money: everybody else is filtered out by the high price.

To be clear, this essentially means if I go through this program and end up working at McDonalds for 5 years, all I have to pay is through the labor of bureaucracy

Only if the program doesn't teach you the meaning of the term "opportunity cost"

The unqualified word "pay" is universally understood among English speaker not to include opportunity cost. When someone asks "how much did you pay for that big Mac", people answer "$3", not "$3 plus twenty minutes to walk there and five minutes in the store"

What if you go to a bootcamp, get saddled with an ISA and then work at mcdonalds and somehow get a better job that has nothing to do with the bootcamp? The bootcamp gets your money. Quantity over quality.

> get a better job that has nothing to do with the bootcamp

I'll take it.

Contrast that with a private loan for tuition.

You pay if you have no job, or any job. Debt has no expiration and is not disc arable in bankruptcy.

It is clear that ISAs are worse if you will be successful. It is also clear that traditional loans are worse if you are wildly unsuccessful.

The tradeoff is the tricky part.

Debt does generally have an expiration and is discardable in bankruptcy... unless you live in America. ISAs might be an attractive alternative to how terrible American laws about student debt are, but the real solution is to fix the awful laws.

A better alternative that you can pursue today is just to seek education abroad, Canadian universities are a fraction of the cost for an equivalent service - or be careful about the education you choose, most state colleges are very reasonable for in-state tuition and you can potentially save on room and board.

Ivy-league schools are overpriced and a waste of money.

If we are talking about higher education in general, the US also has a plethora of affordable colleges.

In California, tuition at community colleges is $1,300/year and $5,700/yr for state colleges.

Even the expensive Universities of California are 14k/year.

The real costs are room, board, and entertainment. For example, a shared dormitory room and food plan is easily 20k/year

> Debt does generally have an expiration and is discardable in bankruptcy... unless you live in America.

If we start with other countries, there will be many other catches. Such as personal bankruptcy not being a concept at all in many jurisdictions.

Only around 10% of total loans disbursements are private.

I don't know about other ISAs, but with Lambda school the job had to be related to your bootcamp learning for you to owe them money.

They removed the "you must get a job in software" clause of their ISAs. A general manager at McDonalds in California makes $58k a year. So if you think you will work your way to manager within five years, you can expect to pay them a cut of your salary.

I don't understand, how do you end paying 150% of the principal loan if it's zero interest?

You can either spend $20k up front for the bootcamp, or pay $30k as part of an ISA over 5 years.

That just sounds like interest with extra steps.

actually its interest with the least amount of steps. Amount due isn't variable and no compounding.

Non compounding interest? I think there is a better word for this.

https://en.wikipedia.org/wiki/Interest#Simple_interest

Still has a time component, though. A flat 50% that is due whether you pay it off in 1 month or 60 months is a fee, not interest.

The term is “fee”. It’s a 50% lending fee.

It is a static markup but not interest, as interest varies with time and is dynamic. This is a markup regardless of time.

Because it’s an income share agreement, so whether you land a job making $100k or $51k you still owe 10% of your income to this company for 5 years. Regardless of the amount actually “borrowed”. And I’m guessing there is a cap at 150% of the “loan”. So if you land a high paying job rt off the bat you could end up paying a lot more than you borrowed.

It's not interest, it's... hey, look, something behind you!

See https://en.wikipedia.org/wiki/Contractum_trinius . There are lots of ways to slice and dice cash flows and quibble over what's interest and what isn't. (See also repurchase agreements, Islamic finance, general structured finance, etc. etc.) It's generally more useful to compare cash flows in terms of yield-to-maturity, instead of strictly by interest rate.

see edit. The major difference is you don't have to worry about one of the most common debt traps: getting stuck paying only the interest. The amount you have to pay is totally fixed. 150% of the principle is the most you'd have to pay assuming you've had a high enough paying job for long enough within that 5 year span after graduating (most people do)

Presumably they mean that the total amount paid is not affected by the timing of payments. If they make a lot of money and pay it all off the first year, they pay the same total number of dollars as if they are unemployed for 4 years and make enough to pay everything off the 5th year. It's something like 50% financing fees, but 0% interest, and forgiveness after 5 years.

> I don't understand, how do you end paying 150% of the principal loan if it's zero interest?

That extra 50% is a once-off fee.

A high fee, to be sure, and one that is deferred, but a fee nonetheless.

-> tuition was definitely overpriced + having to pay 150% of the principal loan

So the actual interest is like 100%? Though it's fixed over a 5 year period, so that turns to around 30% yearly interest rate. Hardly zero.

-> Most people that get jobs in tech will have paid the 150% before the 5 year mark

That's even higher interest for these people. But I guess it's an incentive for the program to get people good jobs.

That's not 30% unless you repay real quick, if you paid it at the end of 5 years in a single payment that's 8.5%, 1.085^5 = 1.50.

In straight amortization using $30k tuition, $45k repayment, over 60 months is $750/mo which works out to 17.25% rate.

It isn't a great deal but it's not terrible vs. other low recourse private loan options.

You can call it "zero interest" if you want, but, if you're paying back 150% of principal over 5 years, that's a 19% APY.

https://www.calculator.net/loan-calculator.html?cloanamount=...

To clarify, you can either pay the principal amount (e.g. 20k) or use the ISA which maxes out at 150% of the principle amount. By "zero interest" I just mean it's a fixed amount that won't ever change. This might seem like a frivolous distinction, but it means that you'll never have to worry about getting trapped paying just the interest so I think it makes a big difference

It’s not helpful to calculate APY that way. After all, if they had made the maximum repayment period 50 years instead of 5 years that would result in a lower APY according to your calculation.

In reality the APY will be heavily dependent and on your income (as a high income will result in repayment period less than 5 years, while a low income will result in only partial repayment by the end of the 5 years).

Interesting. What kind of bureaucracy?