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Blue Meridian, Schmidt Futures back ‘career impact bonds’ via Social Finance’s UP Fund

ImpactAlpha, September 28 – Career impact bonds finance vocational training with the kind of income-share agreements offered by an increasing number of universities as an alternative to crushing student debt (see, “Income-share funds expand college finance options for low-income students). Boston-based Social Finance has invested in two training programs: General Assembly’s accelerated tech education program and Acuitus’ IT education program, which targets veterans. Next up: diesel mechanics. 

I’m excited to share that we’re starting to see results with graduates finding good jobs in the current environment,” Social Finance’s Tracy Palandjian tells ImpactAlpha. 

Social Finance’s new UP Fund will provide up-front capital to up to a dozen programs training underserved adults and students for high-growth sectors like IT, healthcare and the green economy. Students repay the training costs after they get well-paying work; UP Fund’s investors get repaid based on the success of the training program in helping place graduates in such jobs.

Blue Meridian, the $2 billion collaborative of more than 15 foundations aimed at solutions for youth and family poverty that was incubated by the Edna McConnell Clark Foundation, backed UP Fund as one of its first impact investments.

“Despite our best attempts at accountability, the mechanism for financing schools today allows people to get paid whether students actually get a good outcome or not,” Blue Meridian’s Jim Shelton, a former U.S. deputy secretary of education, said in a video call. “The question is, can we realign the incentives so that the best outcome for students is also the best outcome for the invest-itutions.” 

Other investors include Schmidt Futures, Blue Haven Initiative, The Shapiro Foundation, and donor-advised fund accounts at Fidelity Charitable and Vanguard Charitable backed the fund. Social Finance has raised $22.4 million towards its target of $40-50 million. 

The financing structure “puts the worker at the center of the future of work,” says Palandjian. 

Typically, students bear the risk of their investments in career mobility. “The career impact bond reallocates that risk away from students to impact investors and training providers” (listen to Palandjian’s conversation with David Bank on ImpactAlpha’s Agents of Impact podcast.) 

In addition to tuition, career impact bonds cover costs for extra job coaching, emergency childcare, rent and transportation to give students the greatest chance of success (see, “Career impact bonds transfer risk to investors as the future of work arrives (podcast)).

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