Social Finance announced its latest Career Impact Bond, a $4.7 million partnership with American Diesel Training Centers (ADTC) to help unemployed and underemployed people secure in-demand careers and find economic mobility.
With millions of Americans out of work as a result of the COVID-19 pandemic, accessible career training and re-skilling are critical to the nation’s economic recovery.
The ADTC Career Impact Bond will serve 550 people over two years through a 300-hour intensive training program on truck mechanical fundamentals. Courses take place through physically distanced, hands-on instruction in Cincinnati and Columbus, Ohio; Des Moines, Iowa; Kansas City, Mo.; and Tacoma, Wash. ADTC also uses a personalized adaptive online learning platform.
The ADTC Career Impact Bond is the fourth investment through Social Finance’s UP Fund to expand access to career-based education, following deals with tech education programs General Assembly, Acuitus and Alchemy Code Lab. The Career Impact Bond is an impact financing model that uses student-friendly income share agreements to provide education and wraparound support services for people looking to upskill, the company says.
ADTC was founded in 2017 to address a chronic nationwide diesel technician shortage and to help American workers in low-wage jobs transition into sustainable careers. More than 96 percent of its students graduate and 98 percent land jobs in the field. Pre-program hourly wages for typical ADTC students average $10-12 per hour and, after completing the program, graduates’ starting salaries average $18-20 per hour. ADTC graduates find sustained wage growth, with average salaries above $40,000, according to an announcement.
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“We’re proud to partner with American Diesel Training Centers to unlock career opportunities for people who can’t pay the upfront tuition costs or lack the credit history for loans,” says Tracy Palandjian, CEO and co-founder, Social Finance. “ADTC provides a vital source of talent as the industry faces a massive need for diesel technicians.”
The Tech Force Foundation’s study, “2020 Transportation Technician Supply & Demand Report,” estimates a need for nearly 170,000 new diesel technicians between 2020 and 2024.
“Traditional education will not solve this problem,” ADTC CEO and Co-Founder Tim Spurlock says. “The time frame is too long, it’s too expensive, and it does not align with the skills the industry wants in a new diesel technician. The ADTC Career Impact Bond allows us to train more students with our proven, hands-on, 300-hour model that focuses on mechanic fundamentals. More than 150 companies employ our graduates who are on their way to great careers in a rapidly growing field.”
How the ADTC Career Impact Bond works
With the ADTC Career Impact Bond, impact investors pay the cost of tuition and a toolset so students enroll without any upfront cost and leave ready for their first job in the field. Students also receive wraparound services, such as career coaching and financial literacy support, and open-door guidance once they enter the profession. A portion of ADTC’s revenue is linked to student success, incentivizing ADTC to effectively prepare students for careers.
The cornerstone of the Career Impact Bond is its student-friendly terms, outlined in a Student Bill of Rights. ADTC students who graduate and find annual salaries between $30,000-$40,000 repay the cost of their tuition in flat-fee, monthly payments of $150 over a fixed 48-month period. Students whose salaries exceed $40,000 pay $280 monthly over the same term. IonTuition, in collaboration with MentorWorks Education Capital, is the servicing partner managing student repayment.
This is the first Career Impact Bond where certain employers, like Interstate NationaLease, Palmer Kenworth and National Fleet Management, will take over monthly tuition payments for the graduates that they hire. This feature encourages employee retention for participating employers.
ADTC is one of four Career Impact Bonds supported by Social Finance’s UP Fund, which includes investments from Blue Meridian Partners, Schmidt Futures, Blue Haven Initiative and The Shapiro Foundation in the first close.
Second close investors include the John D. and Catherine T. MacArthur Foundation; Pershing Square Foundation; the Michael & Susan Dell Foundation; MFS Investment Management; individual investors with support from Align Impact; and individual donors at Donor-Advised Funds via The Boston Foundation, ImpactAssets, Fidelity Charitable and Vanguard Charitable.
The UP Fund’s first close was in December 2019; its second close in November 2020 brings the fund to $36 million toward a final close later this year. Social Finance raises the capital and manages the UP Fund, as well as the individual Career Impact Bonds, identifying and vetting training providers, structuring partnerships, and managing for impact throughout the 10-year life of the fund.
