BloomTech, formerly known as Lambda School, has recently been fined by the US Consumer Financial Protection Bureau for deceptive practices in their student loan agreements. The institute advertised a way for students to enter high-paying tech jobs “risk free” with “no loans” by paying 17 percent of their future income for five years instead of the $20,000 tuition fee. However, the CFPB has found that these Income Sharing Agreements (ISAs) were actually loans, as Bloom was earning an average finance charge of $4,000 on each one. Students could face collections if they failed to make payments, and Bloom was selling these debts to investors for a profit.
Over 11,000 students were affected by these deceptive loan practices between 2017 and 2023. While Bloom no longer offers these loans as of 2024, the repercussions of their actions continue to impact students. The CFPB has ordered BloomTech to cancel loans for students who haven’t made a payment in the last 12 months, allow current students to leave the program without debt, and refund some money to graduates who did not secure high-paying jobs as promised. Despite these measures, some students are still left with loans, albeit capped at the original tuition price.
Deceptive Job Placement Rates
In addition to the deceptive loan agreements, BloomTech also misled students about their job placement rates. While claiming a 100 percent job placement rate in one cohort, it was later revealed that this data was based on just one student. Subsequent job placement rates of at least 71 percent were also inflated, as internal reports to investors showed a more realistic rate of around 50 percent. This discrepancy further highlights the lack of transparency and honesty in BloomTech’s operations.
Beyond financial deception, the CFPB’s report also sheds light on the quality of education provided by BloomTech. The curriculum frequently changed, and instructors were found to be teaching assistants with limited programming backgrounds who were paid just $15 per hour. Consequently, many students reported having to teach themselves the course content, leading to concerns about the lack of professional instruction and support in obtaining the skills needed for job placement.
The case of BloomTech serves as a warning about the dangers of deceptive practices in educational institutions. Students who hoped to enter the tech industry with promising job prospects found themselves burdened with hidden loans and inadequate education. The actions taken by the CFPB to fine BloomTech and ban its CEO from student lending activities are steps towards accountability, but the impact on students who have already been affected cannot be overlooked. It is essential for educational institutions to prioritize transparency, honesty, and quality education to ensure that students are not misled and their future prospects are not compromised.
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