Yahoo News Priyanka Chopra’s Favorite Coding Bootcamp Accused of ‘Fraud’
Buzzy coding bootcamp Holberton School counts Priyanka Chopra as an investor, and U.S. Sen. Chris Murphy named it his “Innovator of the Month.”
But on Friday, regulators at the California Bureau for Private Postsecondary Education (BPPE) sent Holberton a “notice and emergency decision” demanding they cease enrollment, instruction, and the collection of fees. Hyped as pioneers of Income Share Agreements (ISAs)—an alternative to student loans tentatively embraced by the Trump administration under which students agree to pay a portion of their salary after graduation—the school is now looking down the barrel of aggressive scrutiny in part for that very practice.
In their decision, a copy of which was obtained by The Daily Beast, California education regulators suggested Holberton represented an “immediate danger to the public’s health, safety, and welfare.” Among other alleged shortcomings, the bureau accused the school of failing to meet “institutional minimum operating standards,” and alleged Holberton obtained approval to operate “by fraud in July of 2018,” and “falsified their Application for Approval, enrollment agreements, and catalog and the institution engaged in numerous prohibited Business practices.” The decision, dated Jan. 24, included a declaration from Bureau analyst Brian Kauth alleging that despite its approval being contingent on not offering ISAs, the school had gone ahead and done so anyway.
Numerous attempts to reach Holberton staff via phone and email prior to publication were unsuccessful. However, on Tuesday at 12:54 a.m., Holberton cofounder and chief executive Julien Barbier sent an email to students at the San Francisco campus informing them of the decision. In the email, a copy of which was obtained by The Daily Beast, Barbier wrote, “We have been working with the BPPE throughout the licensing process over the last few years and are eager to continue to fully cooperate with them so that we can address their concerns and return our focus to our core mission of educating you, our valued students. We’ll know more soon, as we are taking active steps to meet with them and address their concerns as soon as possible. In the meantime, there is no change to day-to-day operations of the school.”
Under the terms of Holberton’s ISAs, students pledge to give Holberton 17 percent of their pretax income for 42 months, up to a cap of $85,000, the full tuition to the school, according to its website. According to copies of Holberton ISA agreements reviewed by The Daily Beast, if a student’s income falls below $3,333 a month ($40,000 a year), that student’s ISA is placed in deferment, which gives students who don’t find jobs after Holberton some protections. This kind of safety-valve provision is generally advertised as a feature of ISA agreements, somewhat like income-based repayments on student loans.
For each month the contract is deferred, the payment term of the ISA can be extended by an additional month for up to 24 months, the agreements suggest.
Holberton School alumni told The Daily Beast that, prior to the regulatory action, they had concerns about the terms and cost of the Income Share Agreements and the quality of education the school offered generally. Among other forums for venting, some congregated in a private Discord chat room where they shared information and attempted to organize inside an institution the rest of the world seemed to regard as the next big thing in higher ed.
“The mood in the chat room when it started was just a lot of anger, a lot of hate, and also a lot of relief,” said Essence Boayue, a former Holberton student from cohort 6 of the San Francisco campus who said she created the chat room. “I got a lot of messages that were basically, ‘Hey, I didn’t know that other people thought this way. I didn’t feel like I could talk to my classmates or other Holberton people because I didn’t know that they were also upset with the school.’”
This is not the first time California regulators have tussled with coding bootcamps—often for-profit, unaccredited schools that promise skills like programming that have surged in popularity in recent years due to job growth in the tech sector. On July 24, 2019, the bureau slapped Lambda School, a Holberton competitor, with a $75,000 fine and ordered it to cease operations due to Lambda’s alleged failure to properly register. (The school said the regulatory action amounted to a “misunderstanding” and continued operating.) And in February 2014, the bureau sent cease-and-desist orders to two other bootcamps, App Academy and Hack Reactor.
The bureau’s decision against Holberton reflects California’s “track record for holding such schools accountable,” Joanna Darcus, staff attorney at the National Consumer Law Center, told The Daily Beast in an email. However, Darcus described the action against Holberton as “noticeably sharper” compared to past actions against competitors such as Lambda School, and anticipated the move would send “a strong message to regulators in other states” about the need for oversight of Holberton and similar schools.
Although Holberton started in San Francisco, it has since expanded to Tulsa, Oklahoma, and New Haven, Connecticut, in the U.S., and to Tunisia, Colombia, and Lebanon. The crux of its appeal as part of a new model for education resides in its ISA option as a means to pay for its two-year program, which was approved by the bureau to offer full stack engineering instruction. Although ISAs are not new—Yale experimented with the approach in the ’70s—accredited institutions like Purdue and for-profits like Holberton have led a wave of adoption in recent years. Holberton describes its ISA as a unique financial product with little similarity to debt, having “no principal balance and no interest,” and portrays the ISA as a centerpiece of its “no upfront tuition” approach.
But in the eyes of California authorities, ISAs raise legal questions. In a Feb. 13 memo titled “ISA Agreements Under the Bureau's Current Laws,” Mina Hamilton, attorney for the Legal Affairs Division of the California Department of Consumer Affairs, noted that state regulations do not explicitly address income-sharing agreements but also listed several concerns. One was whether ISAs are loans and, if so, whether they were compatible with relevant laws about loans, including whether they comply with the Federal Truth in Lending Act. The memo noted that if ISAs were characterized as consumer loans, “it is unclear how an ISA could comply with these laws.”
Researchers and consumer protection advocates have been watching the emergence of the ISA model, which has a fan in Secretary of Education Betsy DeVos, with skepticism. “Students already don't understand their federal student loans in traditional colleges,” said Louise Seamster, a sociology professor at the University of Iowa who researches student debt. “That's the best of circumstances. So it's hard to say confidently that they would ever understand what an ISA is signing them up for.”
Tariq Habash, Head of Investigations at the nonprofit advocacy group Student Borrower Protection Center, raised concerns about the affordability of ISAs like those at Holberton. “We are seeing income share agreements being used to inflate the cost of... programs like Holberton that provide no expert faculty to instruct students,” Habash wrote in an email to The Daily Beast. “Students should beware—these products are designed with investor profits, not students’ best interest in mind.”
Requests for comment from past boosters Chopra and Sen. Murphy were not immediately returned prior to publication. But that the school had drawn state regulators’ attention came as a relief to some who had seen it up close.
“I can’t tell you how much it means to me that BPPE has taken their responsibility to police organizations like Holberton seriously,” Boayue said in a text message to The Daily Beast. “I’m so happy that my fellow students and I will be able to find some relief from this situation.”
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