By Alex Kish


At this point in the game, it might seem cliché to talk about the impact COVID-19 has had on higher education and how students have been forced online.  But that doesn’t change the reality that unscrupulous actors are targeting vulnerable students (such as low-income students, veterans, and people of color) in order to turn a profit during this crisis.  While enrollment at brick and mortar schools has dropped, enrollment at online for-profit colleges has increased.  Many for-profit schools have changed their advertising in response to the pandemic, highlighting their online programs and making questionable claims of affordability.  Prospective students who still find themselves without work and are looking for ways to be competitive could be lured in by these promises (and likely have been).

With talk of COVID-19 relief back on the Hill after the election, many higher ed experts and members of Congress are taking a hard look at the way students pay for college.  One instrument that has been gaining traction in recent years is the income share agreement (“ISA”).  An ISA allows a student to attend class without paying anything upfront, but, after they graduate, they need to pay a percentage of their future income back to the school.  This type of arrangement may seem especially attractive to students who aren’t able to finance their education through traditional means.

Even before the pandemic, Veterans Education Success received complaints from student veterans about a California IT school called Lambda that relies primarily on ISAs.  One student veteran decided to go to Lambda because she felt that an ISA was the only way she could pay for school.  She had previously used her GI Bill at one of the Art Institutes and had taken on tens of thousands of dollars of federal student loan debt.  She was drawn in by Lambda’s advertisements promising high paying jobs and touting ISAs as an investment in students.  For example, Lambda’s webpage claims that “Our ISA is an investment in you” and “Lambda School only makes money if you land a job making $50k or more.”  Another Lambda webpage states that “we only succeed when you do.”

She later discovered that these were empty promises.  She found a disorganized program that barely taught students basic tech skills.  These issues prompted her to do some research, and she discovered that California had previously ordered Lambda to stop enrolling students.  She and other students wanted to get out of their ISAs.

Eventually, enough students complained that Lambda defrauded them by making promises it didn’t fulfill, and Lambda offered for students to get out of their ISAs and the option to go to arbitration.  One student who was let out of the ISA by Lambda found it difficult to be accepted into IT programs at other schools.  Some students who decided to arbitrate their complaints against the school found the odds stacked against them and lost, according to the students. Veterans Education Success asked the state of California to take action on behalf of students. Lambda later agreed to change their ISAs into retail installment contracts to comply with state laws.

Students need to be especially wary of schools like Lambda that make promises of high incomes and offer ISAs as a fast-track.  But more importantly, regulators need to enforce existing consumer protections laws (such as the Truth in Lending Act and Section 5(a) of the FTC Act) and hold schools that abuse ISAs accountable.  State regulators should also take action and enforce their consumer protection laws.  With millions quarantined and out of work due to COVID-19, consumers are especially vulnerable to promises of an affordable online education and high paying jobs from unscrupulous ISA providers.  Letting schools like Lambda go unchecked will only make things worse.