A Sandbox for Innovation: My Exploration of Pay for Success in K-12 Education

Abstract

Pay for Success is an innovative financing tool through which private investors provide upfront capital for high quality, evidence-based social services programs, and are paid back by government once pre-determined outcomes are reached. This tool enables governments to explore new programs without risk, and connects dollars directly to outcomes, rather than the delivery of services. Social Finance, a Boston-based nonprofit, launched the Pay for Success field in the U.S. in 2011, and is a leading practitioner in developing and implementing Pay for Success projects. Although 20 projects have launched in the U.S., none have been in the field of K-12 education due to the complexity of the tool and challenges associated with applying it in education contexts. This Capstone is focused on the strategic project that I led as a resident at Social Finance, through which I sought to assess the relevance of the Pay for Success model in the K-12 education sector, and pursue adaptations of the model to increase its potential for impact in the space. The foundation of my work was a set of six education projects that Social Finance launched in the second half of 2017, each intended to assess the feasibility of Pay for Success to support an education service provider’s K-12 intervention. My action plan for adaptation, which required both mindset and model changes to Social Finance’s typical approach, was grounded in change management literature and centered on engaging across the six specific projects to understand and address the barriers that Pay for Success presented across the projects’ education contexts. Through my work on and across these six projects, I found that Pay for Success, as it is traditionally defined, does have narrow relevance in the K-12 education space. The two major challenges that we identified included a lack of rigorous evidence for particular interventions, and a fundamental disconnect between stakeholders who pay for and implement education and those who benefit (or suffer) from the outcomes of education. To address these challenges, we developed four adapted models, each based on the traditional Pay for Success approach, but each with higher potential for impact in the education space. My strategic project has significant implications for Social Finance and for the Pay for Success field. By broadening the definition of Pay for Success beyond a single model, to include a range of outcomes-based financing tools such as the four adaptations that we explored in my work, there is immense opportunity to expand the reach, relevance, and impact of this innovative concept in education and beyond.