Bloom Institute of Technology, formerly known as Lambda School, has recently come under scrutiny from the US Consumer Financial Protection Bureau (CFPB) for its deceptive practices regarding student loans. The company, now rebranded as BloomTech, was permanently banned from issuing any more student loans, fined $164,000, and required to release some students from their debts. This article will delve into the details of BloomTech’s misleading practices and the consequences they face.
BloomTech advertised a unique way for students to secure high-paying tech jobs without taking out traditional loans. Instead, students would pay 17 percent of their future income for five years, as opposed to the $20,000 tuition fee. However, the CFPB determined that these Income Sharing Agreements (ISAs) were essentially loans, as Bloom was profiting from them through finance charges and selling student debts to investors. This discovery led to the issuance of a ban on future loans and imposed fines on the company and its CEO, Austin Allred.
As a result of the CFPB’s investigation, BloomTech was ordered to cancel loans for students who hadn’t made payments in the last year, allow current students to exit the program with no debt, and provide refunds to graduates who didn’t secure high-paying jobs. Despite these measures, BloomTech CEO Austin Allred agreed to pay a significant portion of the penalty and is barred from student lending activities for a decade. However, the company can continue its operations with third-party loans moving forward.
In addition to the financial misrepresentation, BloomTech also faced criticism for its educational practices. The CFPB noted that the school frequently altered its curriculum and relied on teaching assistants with limited programming backgrounds. This led to complaints from students who felt they had to teach themselves the course material. Furthermore, BloomTech’s job placement rates were called into question, with discrepancies between public claims and more accurate methods reported to investors.
The case of Bloom Institute of Technology, now BloomTech, serves as a cautionary tale of the consequences of deceptive practices in the education sector. The company’s misleading advertising of ISAs as a risk-free alternative to traditional student loans has led to regulatory action, fines, and scrutiny of its educational quality. Moving forward, it is essential for institutions to be transparent and ethical in their dealings to ensure the well-being and success of their students.
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