Commentary: How New York can fight student debt and lead the workforce development revolution

In recent weeks, much has been written about the U.S. Supreme Court case challenging President Joe Biden’s student loan forgiveness program – and rightfully so. The average student borrower has nearly $38,000 in debt and 92% of loans are from the federal government, which means apparent skepticism from the Court’s conservative majority could destroy this important lifeline before millions of Americans feel any relief.

But the debate over student loan forgiveness overshadows an important fact: the majority of American adults – 62.2% – don’t even have a four year college degree. Tens of millions of Americans are being locked out of good jobs and left behind for a number of reasons – from systemic barriers that have long denied opportunity and access to communities of color to jobs increasingly requiring advanced degrees for even entry-level positions.

We may say America is the land of opportunity, but right now the American dream is out of reach for millions of our neighbors.

It’s clear we need new avenues to help New Yorkers advance their careers and increase their earning potential outside of college. Workforce development programs, which provide direct training in the skills that are needed in today’s economy, are a viable path forward. But right now, the available funding for these programs is barely a drop in the bucket compared to what’s needed to bridge the skills gap. Even in a wealthy city like New York, there’s only $28 million in annual philanthropic funding for adult job training – which would fund training for less than 1% of the 1.7 million New Yorkers currently unemployed or stuck in low-wage jobs.  

So, what can we do to support the other 99 percent?

As we emerge from the pandemic and stand on the cusp of a tech jobs revolution – from a coming boom in domestic semiconductor manufacturing to rapid developments in technologies like artificial intelligence – we need bold thinking and innovative solutions. But if we’ve learned one thing from the student debt crisis, it’s that people shouldn’t have to take on immense amounts of debt with no guarantee of a return on their investment. 

One shining solution is called outcomes-based financing, a model where workforce development programs tie payment to a trainee’s employment trajectory, rather than charging fees up-front like colleges and universities.  

Here’s how it works: thanks to funding from social impact investors through “job bonds,” participants don’t incur any cost during their training – not a single dime up-front. Then, after a graduate secures a high-paying job, they pay a percentage of their earnings for a set amount of time to help repay the bond’s debt service. If someone doesn’t immediately get a job or if their salary is below a certain level, they pay nothing. If they stop working for any reason, their payments pause, too. 

Outcomes-based financing has already produced transformative results. At Pursuit, the non-profit I co-founded in 2011, we use Pursuit Bonds — a type of outcomes-based financing — to provide long-term, intensive training that helps New Yorkers from low-income and underserved communities land their first jobs in tech. After going through our training program, Fellows’ average annual salary more than quadruples, growing from $18,000 to $90,000. These bonds also allow us to offer on-the-job support and professional development for another three years after Fellows begin their first job to ensure they thrive. Put another way, each one of our Fellows earns an estimated $2 million more in their lifetime than they would have otherwise — all while being protected from crippling student debt.

By combining social impact investing and outcomes-based financing, we can radically expand workforce development programs to reach tens of thousands of New Yorkers more than we can right now.

Between ballooning student debt and recent declines in college enrollment, there is a clear need to reimagine the pathway to a fulfilling, well-paying career. In New York, Gov. Kathy Hochul has already signaled support for outcomes-based workforce development programs, but we are still far from where we need to be. State law doesn’t address or even define outcomes-based financing like job bonds and some regulators mistakenly classify graduates’ payments as tuition, creating uncertainty that prevents this innovative model from truly taking off. 

The Empire State is the country’s financial center and has an opportunity today to lead a national movement that redefines how people are prepared for the jobs of the future — all we need is for our leaders in Albany to take up the mantle, embrace job bonds, and create a legal pathway for these programs to expand. Together, we can give tens of thousands of New Yorkers the skills they need for a new future.