The recent news of Bloom Institute of Technology, previously known as Lambda School, being permanently banned from issuing student loans by the US Consumer Financial Protection Bureau (CFPB) has shed light on some shocking deceptive practices within the coding bootcamp industry. The company, under the guise of offering high-paying tech jobs with “no loans,” actually engaged in what the CFPB has deemed as predatory lending practices through Income Sharing Agreements (ISAs).
While BloomTech advertised a risk-free way for students to enter the tech industry by paying 17 percent of their future income for five years instead of the $20,000 tuition fee, the reality was far from what was promised. The CFPB found that these ISAs were essentially loans, with Bloom earning an average finance charge of $4,000 on each agreement. Moreover, students could face harsh consequences, including debt collection and default, if they were unable to make their payments.
The consequences of BloomTech’s deceptive practices have been severe for many students. More than 11,000 students were affected by these practices between 2017 and 2023, leading to financial burdens and uncertainties about their future. While the company has been ordered to cancel loans for non-paying students and provide some relief to graduates who did not secure high-paying jobs as promised, the damage has already been done.
The Fall of BloomTech
With the ban on issuing future loans, the rebranding to BloomTech may not be enough to salvage the company’s tarnished reputation. CEO Austin Allred, who has personally agreed to pay a hefty penalty and has been banned from student lending activities for a decade, must now face the consequences of his actions. While the company can continue operating with third-party loans, it remains to be seen if it can recover from this scandal.
The Lessons Learned
The case of BloomTech serves as a cautionary tale for the coding bootcamp industry and the broader educational landscape. It highlights the importance of transparency, accountability, and ethical practices when dealing with student loans and financial agreements. Students must be vigilant and informed about the terms of any financial arrangement they enter into, ensuring that they are not being taken advantage of by deceptive institutions.
The saga of Bloom Institute of Technology reveals the dark underbelly of the coding bootcamp industry and the potential pitfalls of promises that seem too good to be true. It is a stark reminder of the importance of due diligence and regulatory oversight in protecting the rights and financial well-being of students seeking to further their education and career prospects.
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