THE CAREER IMPACT BOND
The Career Impact Bond (CIB) is a student-centered income-share agreement (ISA) that expands access to high-quality, industry-recognized career training to people from low-income communities and those who face barriers to education and employment, such as criminal justice involvement, immigration status or low levels of educational attainment or professional experience. It works like this:
Impact investors provide catalytic capital to training providers, which use the funds to cover a portion of the upfront training costs and deliver critical support services for typically underserved students.
Students enroll free of charge, persist and graduate. Those who gain meaningful employment repay program costs as a fixed percentage of their income, capped at a certain dollar amount and for a certain period of time. And those who don’t obtain and maintain meaningful employment following graduation pay nothing.
Impact investors and training providers share any payments received from students who find good jobs and achieve increased economic mobility.
The American Dream is fading for many.
Before COVID-19, we were already experiencing an urgent need to re-imagine and rebuild pathways to economic opportunity. Just half of people born here after 1980 were on track to earn more than their parents compared to 90% the generation before and we experienced levels of income inequality last seen during the Great Depression. Why? Federal funding for workforce development programming, the primary resource for basic job training, upskilling, and reskilling among those most in need, dropped by 35% since 2000. At the same time, rising postsecondary education costs have either discouraged people from pursuing postsecondary degrees or credentials, or forced them into taking on large amounts of student debt without assurances of employment or career advancement. This approach to post-secondary training requires that students bear nearly all the risk by either taking out loans or pausing on paying jobs to upskill, with no guarantee of employment.
The coronavirus epidemic has only exacerbated this situation, impacting virtually every sector of the American economy and pushing the unemployment rate to historical heights. People in low-wage roles are most susceptible to this economic upheaval, as businesses in the accommodations, food, retail industries, spaces where interpersonal service is critical to success, layoff or furlough their workforces.
While there are a growing number of accelerated training models that provide skill building for in-demand occupations, lower-income people often can’t access them due to cost. This keeps many people underskilled and underemployed.
Social Finance is committed to addressing the dual challenges of declining economic mobility and the growing skills mismatch with the CIB. We aim to open pathways to good jobs in high-growth fields like IT, nursing, and green energy to give more people a chance at economic mobility.
The CIB is a student-friendly income-share agreement (ISA) that unlocks access to quality, industry-recognized training for people who face barriers to education and employment.
Leveraging the market
Impact investors cover upfront program costs, which students repay as a fixed percentage of their income over a set period after getting good jobs.
Designing for impact
Social Finance structures impact-first, cost-effective, and fair CIBs that help participants to cultivate viable career paths. If students don’t find a job with a set salary threshold, they don’t pay.
CIBs are intended for students who would not qualify for federal or state financial aid, scholarships, or federally-subsidized student loans with income-driven repayments. While there are ISAs that help students who cannot take on the risk of student debt, many low-income individuals do not qualify due to barriers like credit history and citizenship status. And unlike most ISAs, CIBs have shorter repayment periods that are not extendable and have lower caps on repayments.
Additionally, CIBs include wraparound support services such as benefits enrollment assistance and emergency aid funding to help students persist and complete their training. And, a Student Bill of Rights underpins every CIB, reflecting a strong commitment to transparency and learner safeguards.
Active Career Impact Bonds
GENERAL ASSEMBLY CAREER IMPACT BONDExpanding access to careers in technology
The General Assembly CIB expands access to the high-quality, industry-recognized job training initiative offered as part of the Catalyst program to people with limited means or who have come into contact with the criminal justice system.
- Podcast: “Career Impact Bonds Transfer Risk to Investors as the Future of Work Arrives,” Impact Alpha.
- Report: “Increasing Access to Nursing Training.”
If you are interested in learning more about partnering with Social Finance on a Career Impact Bond, contact Director Jake Edwards.