- A legal defense firm for students filed arbitration cases on behalf of 3 former Lambda School pupils.
- The filings accuse Lambda School of misrepresenting its job placement rates in its advertising.
- The former students are seeking refunds and for their contracts to be cancelled.
- See more stories on Insider’s business page.
Three former Lambda School students are taking legal action against the coding bootcamp over accusations that it misrepresented its job placement rate, according to the National Student Legal Defense Network, which filed arbitration cases on their behalf on Thursday.
Lambda School, which has raised $129.53 million from investors like GV (formerly Google Ventures), Stripe, and Ashton Kutcher, is known as a pioneer of the income sharing agreement (or ISA) model, where students can participate in a coding bootcamp without any upfront fees.
Lambda’s ISA lets students skip tuition in favor of paying the school 17% of their salary for two years (up to $30,000) once they have a job that pays over $50,000 a year. While Silicon Valley has lauded Lambda for pursuing an affordable alternative to traditional education, it’s been a tough year for the startup: It laid off 19 employees in April 2020 and announced 65 new layoffs last month as part of a restructuring.
Now, three former students say that Lambda overstated the success of its alumni: They say the school misrepresented its job placement rates in 2018 and 2019 and are asking for their ISAs to be canceled and for refunds of payments they’ve already made.
“Each of the clients feel they’ve been lied to, and they’re beholden to this ISA,” Alex Elson, senior counsel and cofounder at National Student Legal Defense Network, told Insider.
The arbitration filings said that Lambda School advertised that its job placement rate was above 80%, but told investors that it had only a 50% placement rate, New York Magazine reported in February 2020. Following the New York Magazine story, Lambda School CEO Austin Allred published a blog post that said that while the 50% hiring rate was “technically accurate” it measured the percent of enrolled students (versus graduates) who were hired.
“The company knew the representations were false, went ahead and broadcasted them to the world anyway,” Elson said.
Meanwhile, the three students say that the high job placement rate on Lambda School’s website was critical to their decision to enroll and take out an ISA, the arbitration filings said. Two of the students are not employed, while one found a job independently of the school, Elson said.
A Lambda School spokesperson said in a statement that it had a policy against discussing individual situations in detail publicly, but would review the cases:
“In general, though, for any student’s ISA payments to be activated, they would have first signed an ISA contract and subsequently landed a role leveraging skills learned at Lambda School that pays $50K or more in salary,” the spokesperson said (see full comments at the end of the piece).
In a recent outcomes report, Lambda School said that out of 743 students who planned to graduate in the second half of 2019, 202 students withdrew, 2 graduated early, 300 graduated on time, and 214 graduated later. Out of the 300 students who graduated on time, 234 were job seeking and 217 found jobs. The success rate varies greatly depending on how one interprets those numbers.
Job placement misrepresentation is not uncommon, according to Elson, who referenced the now-shuttered Corinthian Colleges, which the US Department of Education fined $30 million for misrepresenting job placement rates.
“There are tons of examples of for-profit schools — that are almost always predatory — that inflate those statistics,” Elson said.
The National Student Legal Defense Network said it’s filing arbitration cases rather than class action lawsuits because Lambda School’s contract only allows arbitration, in which any settlement is done outside of court.
Lambda School was operating without approval in California
The three students also brought up in their cases that Lambda School had been operating without approval from California’s Bureau for Private Postsecondary Education (BPPE) until August 2020. While the BPPE ordered it to stop its advertising and cease operations in March 2019, Lambda School continued to enroll students and operate, Insider previously reported.
The students claim in the arbitration filings that if they had been aware that Lambda School was operating illegally in 2019 and that its legal future was uncertain, they would have looked into other options for learning web development.
Lambda School ultimately did receive approval last year, with the caveat that it cannot offer ISA to California students. Now, Lambda School offers California students Retail Installment Contracts, which allow students to defer tuition until they get a job making $50,000 or more, but requires them to pay back the full $30,000 eventually, regardless of how many years it takes.
The former students in their arbitration filings also accused Lambda School of not disclosing to students that it would sell ISAs to investors and hedge funds before students obtain employment. In 2019, Lambda partnered with Edly, which helps schools sell ISAs to accredited investors, although it removed all references to that partnership following reports of the relationship.
The former students also complained that the curriculum was “constantly in flux” and mostly consisted of publicly available materials online, while instructors “had limited knowledge of the curriculum and struggled to keep up with the frequent changes.” Other current and former students previously shared similar accusations with Insider.
The National Student Legal Defense Network is still receiving complaints about Lambda School
Elson says the National Student Legal Defense Network got involved in this case because several former Lambda School students reached out — and that additional students are still coming forward with new issues, some of which are also included in the arbitration filings.
For example, the firm recently received complaints about the school’s so-called “team leads” program which allowed students to get paid to essentially become teaching assistants and mentors to other students. However, in the arbitration filings filed on Thursday, students allege that last September, Lambda School said it would eliminate this program and instead require all students to mentor each other and grade each other’s own work.
“Students were furious by the change,” Elson said. “They had to mentor each other. No one grading their work anymore. It was really a free-for-all and complaints escalated at that point in time.”
This was a “lower-cost model” that harms students, according to the arbitration filings.
The filings detailed complaints from other students, including that Lambda “has screwed over ALL of its current students and staff and both are leaving in droves,” and that it “wasn’t good when I went starting in early 2020, and it only got worse over time.”
Elson says the firm hopes to “chart this path” for other wronged students to come forward.
“We believe there are many others entitled to the same relief,” Elson said. “Our clients are taking the brave first leap here to hold Lambda accountable. Their hope and ours is this sets a path forward for others to get the same relief.”
Here’s Lambda School’s full statement:
Per policy, we don’t speak about individual student or alumni situations in detail publicly, but we’re of course happy to review matters directly and will review any cases that are filed. In general, though, for any student’s ISA payments to be activated, they would have first signed an ISA contract and subsequently landed a role leveraging skills learned at Lambda School that pays $50K or more in salary.
Our mission is to de-risk education and expand access to higher paying jobs. For that reason, our ISAs (and RICs in California) are designed with policies that are as flexible and student-centric as possible. That includes our purposely generous proration refund and proration policy for students who decide to leave the program, regardless of tuition payment method. Additionally, if an alumnus loses their job, salary, or is making under $50K a year, their payments are immediately paused. ISAs expire completely after 24 payments or 60 deferred months, even if the total paid is less than $30,000.
Our number one priority is student success. We stand behind the quality of our instructors and our proven student outcomes (which we go into more detail about here and in our outcomes reporting). While we will always strive for our students and alumni to have a positive experience and achieve their career goals, we’re also willing to work with individuals and review cases to come to a resolution.
Got a tip? Contact this reporter via email at [email protected], Signal at 646.376.6106, Telegram at @rosaliechan, or Twitter DM at @rosaliechan17. (PR pitches by email only, please.) Other types of secure messaging available upon request.