ISAs align incentives between teaching institutions and students, they're strictly better than the tuition model. They don't fix all issues because they still require selectivity on admissions (since the school needs to students to succeed in order to survive).
ISAs are also not guaranteed to be good, but the ones originally used by Lambda School were good (Lambda School is somewhat of a third rail topic on HN, so it's worth just considering the terms).
- Only require repayment if students gets a software job making >50k.
- Payment was bounded to 10yr or 30k whatever happens first.
Compare to college tuition which charges huge sums of money often paid for by non-defaultable loans and schools don't really care if students ever get employed by anyone.
From his tweet thread conclusion:
1. Consumers are confused by ISAs
2. And when they take the deal, they often behave poorly
3. And when they behave poorly, you don't have great recourse
4. And there's a looming regulatory threat
5. And the financial markets aren't supportive
My takeaway from this is that it's harder to build an incentive aligned business that really gets students to succeed than it is to take their money as tuition and not have to worry about that so much for business building. I guess I'd argue no shit - that's why ISAs are better, they force the companies to be good at getting positive student outcomes because it's an existential risk if they don't.
That's kind of the entire point.