I’ve been in New Orleans all week, which is always great.

On Friday, I got some time with Stephen Rosenthal, my former board chair at NSNO.

He made the following argument:

1. We spend ~150K to educate a child K-12.
2. Then we send many of these children to college, where many of them drop out.
3. Groups like KIPP to College and POSSE are demonstrating that spending another ~5K per kid can significantly increase the odds that a student will graduate from college.
4. Right now, there isn’t much public funding for these programs.

He makes a good point: would you rather spend ~150K and have a ~10% chance of getting a student in poverty through college or ~155K and have a ~30% chance of getting a student in poverty through college?

While the numbers may not be exact, you get the idea.

So why not create a pay for success / social impact bond program?

Many cities and states have “promise” scholarships that guarantee free or near free in-state tuition for qualifying students.

Why not allocate a portion of these funds to providers who are only paid for each marginal student in their program who graduates college above baseline completion rates?

A provider could then raise debt based on an investor’s belief that the provider will help students through college.

If the provider works, it receives money from the government, the debt is paid off, and college completion rates go up.

If the provider fails, tax payers lose nothing.