A single mother who signed a $30,000 revenue-sharing deal at a for-profit coding boot camp has filed a lawsuit in California, alleging she entered into the deal under “false pretenses “.
Emily Bruner, based in Redmond, Wash., is suing the Bloom Institute of Technology, formerly known as Lambda School, and its director Austen Allred, alleging they misrepresented placement rates, that they operated without a license during his studies and that they hid the “true nature”. of the school’s financial interest in student success.
“I feel like Lambda misled me at every turn – about their placement rates and how they would prepare us for jobs in the field. I was even more shocked when I found out they were operating illegally,” Bruner said in a press release.
“I took time away from my young son and other career opportunities to participate in a program based on lies,” added Bruner, who is seeking reimbursement from the school as well as damages. “While I am grateful I chose not to participate in the arbitration so that I could have my day in court, I wish my classmates who were also misled could be here with me.
Amid a tight job market, some employers are dropping the college degree requirement during the hiring process, pushing more Americans to turning to certificates or short-term programs to learn skills such as coding.
But the Student Borrower Protection Center, an advocacy group, warn students potential harms of revenue sharing agreements. The group argues that, rather than being a solution to the student debt crisis, these agreements can cause serious harm to borrowers.
Another advocacy group, the National Student Legal Defense Network, filed the lawsuit in San Francisco County Court Friday afternoon on behalf of Bruner along with law firms Black & Buffone PLLC, and Cotchett, and Pitre & McCarthy LLPs.
“It is illegal and immoral for schools to lure students into costly revenue sharing deals by promoting false placement rates, but it is one of the many illegal things Lambda School has done,” said Alex Elson, vice president of student advocacy, in a press release.. “We are proud to fight on behalf of students to hold Lambda and its leaders accountable for the severe damage they have caused.”
ISAs are gaining ground
Revenue sharing agreements, known as ISAs, are an alternative type of student loan financing where a borrower receives a loan and then pays a percentage of their income after graduation. The terms of an ISA depend on a variety of factors, such as their major subject of study and projected future earnings.
Traditional colleges like Purdue have also dipped their toes into ISAs by offering them as an alternative to student loans, amid a national conversation about the cost of a college education and the possible need for student loan forgiveness.
Some schools like Purdue offering ISAs characterize their products neither as a “loan” nor as a “credit”, but rather as a “contingent debt” since a student does not have to pay the ISA until he finds a job.
The federal government recently rated ISAs as “private education loans”.
Bruner, the plaintiff, signed her ISA on June 29, 2019 while living in New Mexico because she could not afford the full amount of tuition to attend Lambda full-time, according to the lawsuit. She says she returned home to North Carolina to live with her parents, who would help care for her baby.
She took $30,000 for her six- and 12-month computer science programs offered by San Francisco-based Lambda, according to the complaint. Bruner started school in September 2019 and finished the following August. Lambda students agree to pay 17% of their post-Lambda salary for 24 months once they earn more than $50,000 a year, according to the lawsuit.
After graduating, she couldn’t find jobs as a web developer or software engineer, and according to the lawsuit, employers told her that “she didn’t have the technical skills for the job and that her education hadn’t prepared her to be a web developer.”
Bruner ended up returning to program management, a field she worked in before attending Lambda.
In the lawsuit, she alleged that Lambda misrepresented the fact that she did not have the necessary approval from the state regulator, the California Office of Post-Secondary Education. She also alleged that the school falsified and misrepresented the school’s placement rates.
Finally, she also alleged that the school hid the true nature of its financial interest in student success, in particular by “misrepresenting” that Lambda was only paid when students found jobs and earned income.
Lambda School previously provided Yahoo Finance with the following statement when several students filed for arbitration against them: “As per policy, we do not speak publicly about individual student or alumni circumstances, but we are of course happy to review matters directly and will review any cases that are filed.Generally, however, for a student’s ISA payments to be activated, they would have first signed an ISA contract and then landed a role leveraging the skills learned at the Lambda school that pays $50,000 or more in salary.”
Yahoo Finance has contacted Lambda for an updated response.
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