Skip to content

For Misled Students, a Legal Shield Becomes a Weapon

Students ensnared by Lambda coding camp’s income share agreements find a way out.

Clayton Wilkerson owes up to $30,000 to Lambda coding boot camp (now called Bloom Institute of Technology), which he says misled him into a years-long coding boot camp that ended without a certificate and narrow options for recourse. (Brandon Foster/For Arnold Ventures)

Clayton Wilkerson always wanted to work with computers. The 31-year-old Lafayette, Louisiana, resident attended an information technology high school and hoped to one day find a high-paying job at a tech company. But after leaving college without a degree, Wilkerson ended up working long hours at a restaurant and struggled to find a tech job that required neither training nor a certification.

When a friend told him about Lambda School, a for-profit coding school that purports to teach students the skills necessary to get a job as a software engineer, Wilkerson was intrigued. He went to Lambda’s website and read about the income share agreements (ISAs) that allow students to defer payment until they have a job that pays at least $50,000 a year. He also grew excited by their high job placement rates at big-name companies. He applied and enrolled in 2019.

It was an opportunity to get out of my current situation and to put myself in a better job,” he said. Especially since I was working a low-income job in the service industry, not having to pay anything until I got a job was right up my alley.”

It didn’t take Wilkerson long to realize, however, that Lambda School’s claims about its program were overblown. After several months at the school, he found the teaching quality universally surface level and inadequate for professional development. An online search of the school quickly revealed other students with similar observations and complaints. He reached out to attorneys with the National Student Legal Defense Network (Student Defense), who told him that the school wasn’t properly licensed and its job placement rates were exaggerated. Two-and-a-half years after enrolling, Wilkerson owes the school up to $30,000 for the program and has no certificate to show for his time and work.

Demand for Arbitration

Wilkerson is one of a growing number of students who have taken legal action against Lambda School, now known as the Bloom Institute of Technology. With lawyers from Student Defense and a partner law firm, Black & Buffone PLLC, Wilkerson filed a demand for arbitration against the school. Since May 2021, the group has filed demands for arbitration on behalf of six students who say they were misled by the school.

The demands name Lambda School Co-Founder and CEO Austen Allred in his personal capacity, calling out a well-known figure in Silicon Valley who used a start-up incubator to launch the company in 2017 and who raised hundreds of millions of dollars in multiple rounds of financing.

Wilkerson is asking Lambda School to cancel his ISA, refund any money he’s paid them, and award him damages. His demand is part of a second wave of arbitrations against Lambda filed by Student Defense — the first group of three students to file similar demands in 2021 have already settled with the school. Though the terms of their settlements are private, the students also asked for the cancellation of their ISAs, refunds, and damages.

Lambda School asks students to sign arbitration agreements when they enroll, which waive students’ right to file lawsuits in court as well as to join together in class actions. While arbitration clauses and class action waivers often make it hard for students to find legal representation, Aaron Ament, president and co-founder of Student Defense, said his group will not let these provisions serve as a shield against liability, opting instead to file multiple rounds of arbitrations. Although individual arbitrations can be burdensome and expensive for all involved, he hopes this approach will result in relief for as many students as possible.

There Wasn’t Any Real Instruction’

When Wilkerson started at the Lambda School, he enrolled in a part-time user experience (UX) program to learn how to design software based on how a user interacts with the internet. He started with night classes, so he had to work at the restaurant in the mornings and sacrifice bigger paychecks. The dinner shifts are where the money’s at,” he said.

After months of lectures every night, Wilkerson said he realized the instruction wasn’t adequate. Any topic we did come across was a brief introduction,” he said. There wasn’t anything in depth. There wasn’t any real instruction.”

The part-time UX program was supposed to last more than a year, but his cohort dissolved after about nine months when students voiced their concerns to Lambda School staff.

In response to the students’ complaints, Lambda School gave them the option to leave the program early and have their ISAs wiped. Lambda also said it would be ending the UX program.

But Wilkerson was still determined to earn a certificate, so he took Lambda School’s alternate offer of transitioning to the web development program, which he hoped would include more substantive instruction.

Lambda Coding Screen
Associated Press

Disillusioned by Web Development

When Wilkerson enrolled in the new program, he found the work challenging and the instruction lacking. They brushed you with a topic and then wanted you to deep dive on your own,” he said. His teachers were recent Lambda School students who finished the program and were asked to come back to teach it, but you could tell from being in the class that they weren’t prepared to teach at all.” 

Wilkerson said he considers himself someone who catches on to new topics quickly, especially when it comes to tech, so he was surprised by how difficult he found it to grasp the material. He spent hours a day trying to teach himself at home.

In the demand for arbitration, attorneys explained the insufficient instruction. The curriculum — which was constantly in flux — was made up largely of publicly available online materials,” the filing says. The instructors had little knowledge of the curriculum.”

Wilkerson began regretting his decision to go into web development instead of taking the opportunity to have his ISA canceled. He repeated the third web development unit three times, as each time he completed it, he felt like he still didn’t understand the material enough to move on. He said he was told by Lambda he had repeated the unit too many times and would be forced to withdraw from the program. 

I was mortified,” he said. I now owe these people money, and I don’t have a job to show for it.”

It took so much time — at this point, two years — towards this, hoping to get a better job, and I just get forced withdrawn and a bill attached to it?” he said. I was pretty upset.”

Predatory Practices

Wilkerson said a major reason he enrolled in Lambda School was the high job placement rates — the website touted them as 86% when he enrolled. But according to his demand for arbitration, Lambda School CEO Austin Allred told an investor in private that the rate is closer to 50%.

Not only was the school misleading students, but it was also operating illegally, without necessary approval from the California Bureau for Postsecondary Education. The bureau ordered the school to stop enrolling and instructing students in 2019 because it had never obtained approval to operate as a postsecondary institution, but the school continued anyway. 

We need policymakers to stop the scams and ensure real quality and values for students who are just trying to give themselves a chance.
Kelly McManus Arnold Ventures director of higher education

Wilkerson eventually saw a Facebook ad for another coding boot camp, the Bright Paths program hosted by Perficient, a digital consulting organization. He interviewed and was accepted in their four-month program for underrepresented groups in the technology sector. The program was sponsored, so Wilkerson paid nothing for the training, and upon completion, Perficient offered him a job.

Wilkerson is now working as an associate technical consultant doing front-end development, pretty much the stuff I was looking to do from the beginning,” he said.

It was surreal the first few weeks of being there because after all this time, I finally have a job in the tech industry,” he added.

A Continued Push for Accountability

Kelly McManus, director of higher education for Arnold Ventures, compared Lambda School to schools like Corinthian and ITT Tech, for-profit institutions that are now widely known for defrauding students before they shut down in 2015 and 2016, respectively. The Biden administration said earlier this year that it would cancel debt for students of both schools.

Organizations like Lambda are preying on students’ hopes and dreams — and their beliefs that if they work hard and get training,’ they will be on the path to economic mobility and stability,” McManus said.

Members of Congress have issued warnings about ISAs, which carry many common pitfalls of traditional private student loans — with the added danger of deceptive rhetoric and marketing that obscure their true nature.” A bipartisan group of lawmakers has introduced legislation to further regulate ISAs, but critics say that it wouldn’t stop bad actors from using the alternate loan structure to exploit students.

The Bloom Institute of Technology continues to enroll thousands of students each year, and an increasing number of them are turning to the Internet or contacting Student Defense to express concerns with the program. Student Defense filed a lawsuit in April on behalf of one student who opted out of the arbitration agreement, but most students seeking redress will have to go through arbitration, like Wilkerson.

McManus called on government officials to pay closer attention to schools like Lambda that are taking advantage of students. We need policymakers to stop the scams and ensure real quality and values for students who are just trying to give themselves a chance,” she said.

Ament says that Student Defense won’t slow down its efforts to hold the school accountable. We plan to continue to bring cases until all harmed students receive the relief they are entitled to,” he said.