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How foundations can fill the capital gap in higher education

A flurry of edtech deals notwithstanding, education solutions attracted only 3% of global impact investing assets under management last year, according to the GIIN’s latest survey. One category where capital is not flowing fast enough: higher education.

Changing demographics, high tuitions and student debt, technology shifts and new skill requirements are challenging traditional colleges and universities. The solutions, many untested or targeting low-income populations, are often too risky and or not immediately profitable enough for edtech venture capital firms and other private investors.

That leaves foundations, through flexible program- and mission-related investments, to fill this gap, says a new report from Avivar Capital, commissioned by the Kresge and Lumina foundations.

The two foundations want to increase the share of Americans who hold degrees from 45% today to 60% by 2025.

The deals could be high-risk equity for early-stage edtech ventures, low-return loans to qualifying nonprofits or innovative loans to students via community development financial institutions.

You heard it here first: ImpactAlpha reported two such deals this week (here and here).

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