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'No longer in this room': The curious case of a chameleon zombie coding school

·13 min read

Make School, a San Francisco-based coding school, promised a crash course that would eventually land students jobs in Silicon Valley.

“It's not just about coding here — it's a well-rounded degree,” Make School Co-Founder Jeremy Rossmann said in a June 2019 promotional video. “Our alums now work at a range of awesome startups and top tech companies including Facebook, Google, Apple, and Tesla.”

That promise fell apart over several weeks in July when the entire school seemingly unraveled: Make School was sued for allegedly selling predatory educational financing products to its early students, the school’s accreditation application was denied, financial backers apparently backed out, and students were absorbed by a separate school.

“We applied to something that is no longer in this room,” one Make School student said on a July 16 Zoom briefing call titled "Make School - Town Hall (End Game)" that was published on YouTube. “We applied to something that no longer exists.”

Documentation from the saga and interviews with current and former students, university officials, and higher education experts reveal that Make School depended on a high-risk business model and questionable tactics to become a sort of for-profit-nonprofit chameleon before turning into a zombie-like entity that technically exists but doesn't currently operate.

(https://makeschool.org/)
(https://makeschool.org/)

“It always felt like a scam, in that when the house of cards falls, it shouldn't be surprising,” Mike Pierce, managing counsel at the Student Borrower Protection Center, a consumer advocacy group that supported the lawsuit, told Yahoo Finance.

Pierce, a former Consumer Financial Protection Bureau (CFPB) regulator, added that Make School “had all of the hallmarks of a slick sales pitch more than an actual school, including commitments about job placement, commitments about future earnings, things that you see at the larger for-profit colleges. It appears that they just took a page out of the predatory school playbook and slapped a shiny Silicon Valley wrapper on it. And here we are.”

‘A magical way for someone with absolutely no money to attend’ coding school

Founded in 2012 as an iOS gaming company, the company behind Make School pivoted to become a coding bootcamp called Make School PBC in 2014. (PBC refers to a Public Benefit Corporation.)

Make School PBC began operating without state approval, which is necessary for postsecondary schools to operate in California, and was also unaccredited.

The for-profit school’s early model depended on income-share agreements (ISAs), a type of experimental financing that involves students receiving education-related loans in return for agreeing to repay 20% to 25% of their pre-tax income every month for three and a half years or more.

“It’s like this magical way for someone with absolutely no money to attend school and not have to worry about paying a dime until they land a job,” a former student from the D.C. area, who withdrew from the program early and asked to remain anonymous for privacy reasons, told Yahoo Finance. “The opportunity was sold to [students].”

Make School YouTube video
A Make School YouTube video promoting the coding school. (screenshot/YouTube)

In 2016, the California Bureau for Private Postsecondary Education (BPPE) informed Make School that it was violating state law by operating without the agency's approval. The agency initially fined the school $100,000 and demanded that Make School PBC cease operations in California.

In July 2018, the fine was reduced to $25,000 after the BPPE approved Make School’s proposal to operate as a non-accredited institution.

The coding bootcamp was successful enough to morph into an accredited two-year bachelor's degree-granting institution in December 2018 after an accreditor approved Make School to administer Dominican University's Applied Science degree program. The two-year degree with on-campus instruction cost around $70,000 while students taking the courses online paid around $65,000.

The accreditation-by-association came from the WASC Senior College and University Commission (WSCUC) as part of an incubation program. Under the rules, a new school like Make School could partner with an established college to test course offerings and, after a 3- to 5-year period, apply for its own accreditation.

“The idea of creating the incubation was to allow ideas that may have educational merit to find a footing, even before the entity had met all of the requirements for being accredited,” WSCUC President Jamienne S. Studley told Yahoo Finance. “It was a way for innovation to be pursued.”

Dominican University. (Dominican University)
Dominican University. (Dominican University)

For-profit side becomes ‘the financing arm of the school’ — and then folds

In April 2019, Make School PBC raised $15 million to offer a “unique bachelor's degree program.”

The company then created a nonprofit and began the process to become an independently accredited educational institution.

The Make School PBC co-founders identified a nonprofit entity, Oxford Teachers Academy, that they repurposed as MakeSchool.org, a “separate and independent” entity from the original for-profit Make School, according to emails obtained by the Century Foundation, a progressive think tank, and shared with Yahoo Finance. 

The goal behind moving to nonprofit status was so that they could “seek grants and donations to help low-income students cover living expenses,” Make School Co-Founder Ashu Desai wrote in a blog post announcing the application for independent accreditation in December 2020.

Accreditation also brings extra revenue: Aside from ISAs, students can take out federal loans and Pell Grants to finance the two-year program.

“We're rethinking what it means to be an elite institution — rooted in the progressive value system that inspires the diverse community of learners and makers we serve,” Desai stated in a 2019 press release. “To realize that vision, we've designed an inclusive admissions process … and we've built an education that has enabled our students to outcompete their peers at schools like Stanford and Berkeley for careers at top tech companies.”

The student from D.C. moved to San Francisco in August 2020 to attend the school and took out about $9,500 in federal loans and more than $19,800 for a housing ISA. (Yahoo Finance reviewed loan material to verify the figures.)

SAUSALITO, CALIFORNIA - AUGUST 20:  Heavy smoke from nearby wild fires covers the Golden Gate Bridge and San Francisco on August 20, 2020 as seen from the Marin Headlands in Sausalito, California. (Photo by Ezra Shaw/Getty Images)
Heavy smoke from nearby wildfires covers the Golden Gate Bridge and San Francisco on August 20, 2020, as seen from the Marin Headlands in Sausalito, California. (Photo by Ezra Shaw/Getty Images)

According to a source familiar with the matter who asked to be anonymous out of fear of professional retaliation, the nonprofit was designed to take over instruction after accreditation so that Make School could operate an independent program without leaning on Dominican for support.

And while MakeSchool.org — the nonprofit side — would provide instruction, the for-profit side of Make School PBC would provide “marketing, curriculum, and R&D” to Dominican, according to Desai.

The lawsuit that Yahoo Finance reported on July 1, 2021 — which includes 55 former students who took out ISAs — appeared to be a crushing blow to Make School’s plan. In an email to Yahoo Finance on July 1, Rossmann stated that the for-profit Make School was “in the process of shutting down.”

The Make School co-founder reiterated that the for-profit side was “basically the financing arm of the school” and noted that it had “started an insolvency proceeding” known as an Assignment for Benefit of Creditors (ABC), which has been defined as “a business-liquidation device that can provide a graceful exit strategy for an insolvent debtor as an alternative to formal bankruptcy.”

Rossmann also noted that Make School PBC was “an empty shell” and that the nonprofit would assume “all operations” under new management.

“Make School PBC has now handed over all operations of the bachelor’s program to a nonprofit, has cancelled its ISA program, and is winding down,” Rossmann stated to Yahoo Finance in a July 1 email. “The college will continue to exist, but under new management and without ISAs.”

Make School Dean and Interim President Dr. Anne Spalding declined to speak on the record. 

Jeremy Rossmann appearing on a podcast posted on YouTube talking about Make School.
Jeremy Rossmann appearing on a podcast posted on YouTube talking about Make School's coding school.

'Make School's financing was predatory,' former student says

The lawsuit involves students who had attended Make School from 2016 to 2018 and took out ISAs from Make School and ISA provider Vemo Education. 

Many students found the ISAs to be deceptive given that the amount of money borrowed ended up being exorbitant, and students were burdened with heavy levels of repayment when they found a job.

“It is easy, with the benefit of hindsight, for me to say that Make School's financing was predatory with the difference between the $30,000 per year sticker price for students with money versus the $100,000 cost that I was faced with coming from a working class background,” Faith Chikwekwe, who attended the school from August 2018 to June 2019, told Yahoo Finance.

“Make School fraudulently induced hundreds of students and young people in their late teens and early 20s to sign these unconscionable income share agreements, and once students quite bravely stood up to Make School’s deceptive business practices, it came to light that Make School had grossly mismanaged the company and had no intention of making it right by students,” Melody Sequoia, an attorney at Sequoia Law Firm representing the students, told Yahoo Finance. “Instead, Make School bailed on its own students and left them in mountains of debt.”

The CFPB has also started looking into ISAs with a recent enforcement action against one provider.

Even prior to the lawsuit, Make School was facing financial problems: Rossmann had informed Dominican that their financial model was in peril “fairly early in the spring” of 2021, Dominican University President Nicola Pitchford recalled in a conversation with Yahoo Finance.

“They were not certain of their ability to continue, and so we put together a proposal for how Dominican could absorb the Make School program,” Pitchford said, “and [agreed] that we would be ready to do so either at the end of the summer or even as early as the start of the summer.”

Some donor money then came in, she recalled, and Make School pushed off the proposal. (At the time, Make School had its interview with WSCUC regarding its proposal to be fully accredited.) Make School’s Rossmann had also asked Dominican to switch the partnership from the for-profit Make School entity to the nonprofit Make School entity. Dominican declined to do so, however.

Transferring the partnership would have required steps including due diligence that "the university did not have adequate time to conduct," according to a Dominican spokesperson, as well as approval from Dominican’s Board of Trustees.

On July 12, WSCUC announced that Make School’s candidacy for independent accreditation wasn’t going to be granted and invited them to reapply the following year. Make School then informed Dominican that it did not have the money to operate long enough to reapply for independent accreditation, according to Dominican.

Make School YouTube video
The July 16 Make School meeting where the school administrator discusses next steps for students who would be transferred to Dominican. (Screenshot/YouTube)

In a July 21 press release, Dominican announced that it would be fully taking over the Applied Computer Science program and invited Make School students to complete their degrees at the university.

“So [Make School] would not have the funding to continue and they would need to wrap up operations within basically two weeks by the end of July,” Pitchford said. “And so that was the point at which we sprung into action to say, of course, these are our students, we will figure out how to teach them directly. And we will hire across as many of your employees as we need to deliver the program and continue forward.”

Coding school left ‘its own students holding the bag’

Dominican said 124 students have now moved from Make School to the college as of September 1, with ten of them moving into Dominican’s residence hall.

Many others are unhappy with how things unfolded. The episode “really only confirms how Make School failed to deliver on its promises and is leaving its own students holding the bag,” said Sequoia, the attorney representing some of the students.

“The recent shutdown [of Make School] only further confirms the stories of my clients, which is that this was a school that preyed upon young people in order to enrich a select group of investors that were so-called Silicon Valley innovators and disruptors of education,” Sequoia said, adding that Make School had “a business model that was bad and illegal, and one that had very real consequences for my clients.”

One 18-year-old student from Michigan, who has now pulled out of the Dominican program, expressed frustration at how the process had been handled by both parties.

“The staff [at Make School] had known before us, and they didn’t think to say anything despite the fact that students would be signing leases in one of the most expensive cities in the U.S.A.,” the student said in an email to Yahoo Finance. “Once the rumors spread around the incoming class, the staff sent out a brief email saying the school was closing and to expect more info in the future. I was infuriated.”

Make School. (Make School)
Make School. (Make School)

The student said that his family had taken out a federal Parent PLUS Loan to attend the two-year program, which he estimated cost roughly $100,000 in total, adding that he hopes to not be charged the full amount since he withdrew.

Since the ISAs are now owed to the for-profit entity — which is now insolvent and in court proceedings — it’s unclear how the ISAs will be treated for collection purposes. Unlike other schools that sold ISA contracts to third parties, Make School PBC owns the contracts, and students owe the PBC.

Under California law, based on a recent consent order filed by the state’s regulator against another for-profit ISA provider regarding the servicing of unenforceable ISAs, Pierce noted that it may be such that debt collectors would be unwilling to buy or service Make School PBC ISAs.

“While we can’t predict how our actions will impact the ISA industry, our intent is always to ensure that California consumers are afforded every right and protection under the law,” Maria Luisa Cesar, deputy commissioner of communications at the California Department of Financial Protection & Innovation, told Yahoo Finance. “Our consent order with Meratas and recently announced intent to pursue future rulemaking provides a roadmap for better oversight of the ISA industry and we’re proud to lead the way toward greater consumer protections and a level playing field.”

It's also unclear if debt relief via a Department of Education policy called closed school discharge would extend to the students who did not complete the program. (ED did not respond to a request for comment on this question.)

Make School, meanwhile, faces an existential crisis: The website is still live, though the Twitter account's last tweet was published on July 1. Rossmann declined to discuss the school's future on the record.

At the same time, “it’s not over yet,” stressed WSCUC’s Studley, noting that Make School can still re-apply for accreditation in 2022.

This post has been updated to add additional comment and clarification from Dominican University and replace a photo.

Aarthi is a reporter for Yahoo Finance. She can be reached at aarthi@yahoofinance.com. Follow her on Twitter @aarthiswami.

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