"In the meantime, Lambda shifts the equation: For about half of the ISAs, the company sells the rights to a portion of its returns to investors; in return, it gets cash up front."
You can even see a "Sample Offering" for Lambda School on Edly, a marketplace for reselling ISAs: https://edly.info/investors/
If they hold the ISA and the student doesn’t make any money they don’t make any money. If they sell the ISA and their students don’t make any money soon they won’t be able to sell them and then they don’t make any money.
The only way I see this impacting student outcome is if the school loses motivation to help students post-graduation, but the discount for selling these ISAs must be very high.
Lambda School is still on the hook and loses money until the students are placed and have paid back. It’s about incentive alignment.
the "other issue" is not true of the ones I've seen. most ISAs have an expiration date far shorter than 3 years. the ones in SF I've seen are 1 year.
the "catch" that most people don't talk about with ISAs is that you have to actively job hunt and the school with hold you accountable for that e.g. submitting an minimum number of applications a week, going to networking events, reaching out to recruiters, etc., and if you fail to meet a minimum weekly threshold then you could trigger repayment. that is a big motivation to keep trying to get that first job.