Sun Sentinel Palm Beach Edition
New strategy for job training
Nonprofit group’s model has programs getting paid based on students landing work
Bill Barber saw an ad on Facebook last year for American Diesel Training Centers, a school in Ohio that prepares people for careers as diesel mechanics. It came with an unusual pitch: He would pay for the schooling only if it landed him a job, thanks to a nonprofit called Social Finance.
After making sure it was not a scam, he signed up. After going through the immersive five-week program, he got a job with starting pay of $39,000 a year — about $10,000 more than he made before as a cable TV installer.
“I figured this was my best opportunity to succeed,” Barber, 23, said.
American Diesel Training is part of a new model of workforce training — one that bases pay for training programs partly on whether students get hired. Early results are promising, and experts say the approach makes far more economic sense than the traditional method, in which programs are paid based on how many people enroll.
Right now, there are only a relative handful of these pay-for-success programs that train low-income Americans for better-paying careers. The challenge has been to align funding and incentives so students, training programs and employers all benefit.
But Social Finance, founded a decade ago to develop new ways to finance resultsfocused social programs, is showing how the idea could grow quickly just as the pandemic made job-training programs more important than ever. The coronavirus put millions of people out of work, upended industries and accelerated automation.
The Social Finance effort is powered by a fund of more than $40 million raised from philanthropic investors. The money goes toward paying for low-income students, as well as minority candidates and veterans, to enter the training programs. The group is not related to the online lender SoFi.
It has supported four job training programs, including American Diesel Training, in the past year. It has plans to have double that number a year from now.
The Social Finance income-share agreement with students ranges from about 5% to 9% depending on their earnings — less from $30,000 to $40,000, and generally more above $40,000. The monthly payments last four years. If you lose your job, the payment obligation stops.
When screening programs, Social Finance looks for those that offer training for specific skills linked to local demand, and have data to show that its students graduate and get good-paying jobs.
American Diesel Training, based in Columbus, Ohio, met the requirements. The for-profit company’s program is designed as a short, intensive course to train entry-level diesel technicians, mostly for trucking companies and dealerships.
Social Finance pays American Diesel Training just over 60% of its fee initially. The rest comes later, after a student lands and keeps a job.
A total of 229 students supported by Social Finance have been enrolled. The graduation rate is nearly 100%, and 89% have jobs. Their average annual income is $36,500, and the average gain from income before the program is $12,400.
Today, Barber works in Ohio as an entrylevel diesel technician for U.S. Xpress, a national freight-hauling trucker. With diesel mechanics in demand, the company paid him a $2,000 signing bonus and a relocation fee.