These students thought they were paying for their education with an innovative alternative to loans, but the true cost was hidden, the lawsuit alleges.

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A few years ago, Faith Chikwekwe came across a post on Reddit about a program she thought would help her fulfill her dream of turning her passion for programming into a career.

Cikvekwa liked that Make School seemed to offer a crash course in coding for beginners with elements of a more traditional degree program. When she visited his website to find out more, Cikwekwe was delighted to see pictures of black women like her. But one feature that really pushed it forward in the program: the ability to attend without prepayment.

“For whoever was in my situation, that was everything” Chikvekwe talked about a funding option for Make School called an income-sharing agreement, a deal that instead of paying for tuition before enrollment, students pledge a portion of their future income after they get a job.

At the time, Cikvekwe could not afford to spend tens of thousands of dollars on training to pay a salesperson over the phone, so she signed three income-sharing agreements. But after a few months at Make School, Chiqwekwe began to fear agreements that would require it to split more than 25% of its pre-tax income over about three years and 7.5% of its income over the next three years. after joining graduate school.

“This is money that changes your ability to live and your ability to live with dignity,” Cikvekwe said. She hurriedly left school within a year of enrollment so that she would not have to take additional funding.

Now 29-year-old Chikvekwe is one of 47 former students who say they have been misled about the cost of the agreements. Last week, they filed a lawsuit against Vemo, the company behind Make School’s revenue-sharing agreements, and Make School Inc., the company that until recently operated Make School and is in the process of liquidation (Make School is now run by a non-profit organization). organization).

Are Loans Under Income Sharing Agreements?

The claim is an agreement on the distribution of income. get increased attention from both supporters and detractors. Investors, philanthropists and schools that offer them, ISA innovative product this could help tackle the student debt crisis by allowing students to fund their education in a way that provides protection against low income or job loss. This is because students only make payments if their graduate income exceeds a certain threshold.

ISA supporters called for clearer regulation of agreements as a way to protect students.

But for consumer advocates, agreements are loans under a different name. They say the drive for regulation way to cut ISA from credit laws that protect borrowers from discrimination. They are also concerned about how some coding programs that are not eligible for federal student loans are using ISA to attract low-income students.

“What we’ve seen over and over again is companies – whether in education or finance – talk about disruption, technological advancements, or promises of a better future, but what this lawsuit shows is too often empty promises and piles of debt, ”said Seth Frothman, executive director of the Student Borrower Advocacy Center, a borrower advocacy group that supports the lawsuit.

The lawsuit alleges that the two companies signed students to ISA at a time when Make School did not have the necessary California Bureau of Private Higher Education permission to operate. The lawsuit alleges that international auditing standards issued during this period – from 2016 to 2018 – are not enforceable.

In addition, the lawsuit alleges that Make School and Vemo misled students about the true value of the ISA. According to the lawsuit, Make School told students that they can expect to pay around $ 100,000 for a full bachelor’s degree if they fund their education. In reality, the lawsuit alleges, the value of the agreements could be as high as $ 250,000.

Refunds under revenue sharing agreements are made in one of two ways. Either the student pays a portion of his income towards the obligation for a certain number of months, or he reaches the ISA payment limit.

In the case of Make School, according to the lawsuit, the ceilings ranged from two and a half to three times the amount of funding provided. In addition, funding tuition and living expenses during the typical two-year program duration required multiple successive revenue sharing agreements, which significantly extended the payback period of the financial transaction, the lawsuit said.


“ISA has solved an unresolved problem in higher education – how can students who are not eligible for student loans finance their higher education?”


– Jeremy Rossmann, co-founder of Make School.

The lawsuit alleges that many students were not told they would need multiple agreements until they signed up for the first ISA and were interested in completing the program. Melody Sequoia, a lawyer representing students, called the practice “egregious.”

But the allegations also reflect consumer advocates’ concerns about ISA more broadly – students can find it difficult to understand their terms and true costs.

“The ISA has been presented as new, groundbreaking and innovative, but it really isn’t,” Sequoia said, noting that the federal student loan program allows borrowers to pay off debt as a percentage of income. “This is a loan, even if they say it is not. The reason this is a loan is because the student does not pay in advance, but instead agrees to pay more later. “

Vemo declined to comment on the upcoming lawsuit, but said in a statement that the company supports the creation of a “legal framework to set limits” on ISA. “We strive to ensure that all students have the most transparent and reliable information on how to fund their further studies in higher education,” – said in a statement.

Proponents Offer Revenue Sharing Agreements as Alternative to Debt

Jeremy Rossmann, one of the founders of Make School, wrote in an email that the full cost of the ISA has been published and disclosed in writing in half a century. Make School hasn’t tried to get rich – the ISA program hasn’t been profitable since 2014, according to Rossmann, he said.

But ISA payouts are “high for high-salary students,” he said, “because providing loans to low-income students is expensive, and our ISAs have a built-in insurance policy: pay nothing if you earn less than $ 60,000 a year. … ,” He wrote.

“It is appalling to see a group of alumni, on average wealthier than the faculty and staff who taught them, falsely claim that Make School was unfairly enriched by the ISA program, which was solely to provide upward mobility opportunities for students regardless of their financial situation. … background, ”added Rossmann.

Over the past few years, ISA proponents have presented agreements as an alternative to debt that better aligns incentives between students and their schools. The idea is that the better a student does, the more money the school makes from the deal.

The complaint alleges that employees pointed out to students that the company had used ISA to obtain funding from investors, allegedly informing them in a May Slack post that “[t]The ISA program relied heavily on investors buying these loans in the future in exchange for a Make School loan of the money needed to operate. ”


“It’s money that changes your ability to live and your ability to live with dignity.”


– Faith Chikvekwe, one of dozens of students who claim to have been misled about the true value of revenue sharing agreements.

Rossmann denied selling ISA contracts to investors. “We know that many schools have sold their contracts, and we are proud that we never did,” he wrote in an email to MarketWatch.

Make School no longer offers ISA and its undergraduate program is now run by a non-profit organization. According to the lawsuit, ISA contracts are currently owned by a company in liquidation.

“ISA has solved an unresolved problem in higher education: how can students who are not eligible for student loans finance their higher education?” Rossmann said. “We mourn the students who lost access to the funding they needed to achieve their dreams as a result of this lawsuit.”

“ I’m trying to reclaim some of the financial time that I lost. ”

Chikvekwe, who also has traditional student loans of about $ 40,000, said she never thought she would get a good response on this type of debt. But after her experience with the income-sharing agreement, Chikvekwe said she appreciates the flexibility of the student loan program.

With ISA, Chikwekwe, she felt she had fewer options. For example, unlike a student loan, according to the lawsuit, the ISA’s share of income does not change when the size of the family changes.

“Unless I lose my job or decide to take a job that will bring me very low wages, there really is no way to take a break from wages,” Chikvekwe said of the ISA.

When Cikvekwe initially enrolled at Make School, she hoped it would lead her to a job that would help her save for retirement and amass some generational wealth – “to start being more of a resource than a burden to my family,” as she puts it.

Although she took a job as a software engineer, the ISA, coupled with rent in the Bay Area, ate up so much of Cikwekwe’s income that she couldn’t afford the savings. She returned home to Georgia. “I’m here with my family just to try to reclaim some of the financial time I lost when I paid ISA,” she said.

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