Former Students Are Suing For-Profit Coding Bootcamp BloomTech


BloomTech, formerly known as Lambda School, is facing a class action lawsuit from former students who claim the school and its founder misrepresented work placement rates and earnings for graduates of the program, that it operated as an unlicensed college for several years, and has engaged in illegal lending. BloomTech is a for-profit coding boot camp that has been in operation since 2016 and purports to get students trained in high-demand coding skills quickly and with limited financial risk. The suit argues the school does not live up to its promises.

BloomTech has faced other lawsuits claiming that the school misrepresented how likely graduates were to get a job and how much they were likely to earn. However, this is the first time there has been an attempt to form a class, which could significantly increase the number of plaintiffs. The for-profit school has been in hot water multiple times over the past few years, including operating without approval from California’s college oversight board.

The suit is being brought by the National Student Legal Defense Network, a nonprofit organization that helps students defrauded by predatory higher education institutions. The claims are focused on accusations of fraudulent advertising and illegal lending practices.

“For years, Lambda knowingly seduced the public with inflated job placement rates even though internal records made clear the actual rates were substantially lower,” said Student Defense Vice President Alex Elson. “The time has come to hold the school and its executives accountable, so that the thousands of students they deceived can receive full restitution and move on with their lives.”

The court filing notes that Bloomtech advertised job placement rates for its graduates of between 74 and 90 percent when internal documents showed placement rates ranged from 27 to 50 percent. The students represented in the suit said they relied on the job placement rates that BloomTech advertised when deciding to enroll at the school. They also say they would have made different decisions if they had known that the job placement rates were lower.

Arrangements like this are called Income Share Agreements (ISAs). Proponents say that ISAs offer an alternative to traditional student loans and that they protect students if their education does not pay off because lenders only collect when a student has landed a decent-paying job. But, in reality, ISAs are often worse for students than traditional borrowing. In BloomTech’s case, students only start paying back their ISAs once they earn over $50,000 per year.

The Consumer Financial Protection Bureau (CFPB) classifies ISAs as loans, noting that any group suggesting they are not loans is misrepresenting the truth. There have also been well-publicized cases of ISAs costing students more than if they had just taken out a student loan. Purdue University had one of the first ISA programs, one that it advertised heavily as an innovative way to help students pay for college. However, the program was abruptly shuttered last year after reports of students struggling to pay what they owed emerged.

In addition to getting into trouble with California’s Bureau for Private and Postsecondary Education (BFPE) for operating without approval, BloomTech also had to agree to a settlement with the California Department of Financial Protection and Innovation (DFPI) for having misleading language in its ISA contracts. This settlement was reached in April 2021.

With the decline in hiring for tech firms, it is possible that coding schools like BloomTech will see fewer students interested in their offerings. Students interested in learning to code need to be careful not to get lured in by promises of instant earnings boosts and too-good-to-be-true financing plans.


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