New Funding, Aligned Incentives: How Private Financing Options Can Foster Higher Education Innovation

The emergence in recent years of a range of promising, nontraditional higher education programs—including competency-based education programs and workforce-oriented “boot camps”—has led to a growing interest in ways to facilitate innovation in higher education.

This interest has led to numerous proposals to provide taxpayer support for innovative offerings. Given the risks of expanding access to taxpayer funding, however, reformers should consider how private financing options can also help foster a more dynamic and high-quality higher education system.

To help foster additional private financing options, policymakers should create data systems to enable transparent and validated institutional outcomes and should provide legal and regulatory clarity for ISAs and private student loans. Institutions looking to bring in additional financial-aid dollars should consider private financing options to fund their innovative models and should be amenable risk-sharing arrangements with those funders.

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