Google describes its $100M certificate fund
as a new, outcomes-based approach to student financing
And the no-interest loans the project plans to grant to 20K learners will be structured as a twist on an income share agreement
Participating students will have no up-front costs as they pursue Google certificates
in fields such as data analytics, IT support, project management, and UX design. The fully online programs are offered on Coursera’s platform. They can be completed in 3-6 months.
The nonprofit Social Finance will manage
Google’s $100M investment and distribute funding to Merit America and Year Up, which will provide students with coaching, interview prep, job placement assistance, and living stipends.
“For the past two decades, philanthropy has largely funded these wraparound supports, but nonprofits have only been able to serve a small fraction of the population in need,” says Justin Steele
, director of Google.org for the Americas.
Steele says the new fund’s financing model “will enable it to sustainably upskill Americans with the certificates at scale that has thus far been unattainable.”
Students will be on the hook to pay back no-interest loans for the training program if they secure jobs that pay at least $40K in annual wages. Payments will be flat
over the loan’s five-year term. A borrower earning $40K would owe about $100 per month, Social Finance says.
The average living wage in the U.S. is $16.54 per hour, according
to MIT’s living wage calculator. Steele says that means the program’s $40K annual salary threshold, which is $19 an hour, tops the average living wage.
“If a learner is no longer employed in a job that meets the salary criteria at any point during the five-year term, then payments will be paused,” he says. “We will look at current market conditions and their impact on learners and re-evaluate the minimum income threshold as needed.”
Google says it hopes the fund’s take on financing encourages other companies to follow suit with affordable training options.
“Social Finance will reinvest repayments back into the program for several years to enable future learners to benefit,” Steele says. “This is key, as it enables the fund to create more opportunities for new learners as successful outcomes are achieved.”
Experts say the devil is in the details of the still-emerging program. Consumer advocates ask whether inflation or a recession could pose risks to borrowers, or to the wraparound support groups. Some will be watching for more specifics on borrower rights
, who directs JFF’s Financing the Future Initiative, says creating a sustainable pot of money with a one-time payment is the Shangri-La of philanthropy. And a big part of the allure of income share agreements is their potential to stretch funding, as a 2019 paper
from the Federal Reserve Bank of Philadelphia found.
As a result, Pollack says the new Google fund is an important proof of concept for financing short-term training. “You can induce a lot of co-investment if you can show this works.“
Income share agreements face serious political and regulatory challenges. For example, the Consumer Financial Protection Bureau ruled last year
that an ISA provider misrepresented its offerings to students and failed to comply with laws for private student loans.
A key problem for ISAs is that they typically claim to not be a form of loan. Consumer groups
and the CFPB disagree. But Google and its partners describe the new fund’s financing as a loan.
“Implicitly, it is accepting the legal treatment of loans,” Pollack says, while also being “very similar to an ISA in concept.”