States can expand and fund community college non-degree programs through revolving loans—here’s how

This month, the U.S. Department of Labor reported that the American unemployment rate is stubbornly stuck at 6.7% -- a rate that hasn’t been seen since the 2008 financial collapse. Many of those jobs may not return as automation, digitalization, and cultural shifts transform the labor market. While a vaccine is coming, now more than ever, we need new strategies to get more Americans back to work in good jobs.

Colleges can help workers upskill by creating and scaling high-quality, affordable, non-degree programs that lead to quality jobs.

Indeed, liberal arts colleges, research universities, and community colleges are all embracing non-degree credential programs like certificates, industry certifications, licenses, and apprenticeships. These programs can help equip learners with the skills they need to secure quality jobs without needing to invest the time and money into a traditional associate’s or bachelor's degree—which isn’t always necessary to secure a decent job.

In particular, community colleges have long been at the forefront of offering these flexible, employer-aligned non-degree credentials. Community colleges serve many of the most economically vulnerable learners in the nation-- first-generation, low-income, Black, Latino, and Indigenous students from the working class. Many community college students are also “non-traditional” and above the age of 25.

Unfortunately, it isn’t always easy for community colleges to finance non-degree credentials:

1. First, community colleges as a sector have been starved of financial investment from state and federal governments making it challenging to, for example, purchase the data analytics tools needed to understand the labor market needs, support the startup costs of the new program, and sustain the long-term operational costs.
2. Second, community college foundations, which are much smaller than their 4-year counterparts, are mostly focused on scholarships.
3. Third, many non-degree credentials are offered “not-for-credit” which makes it challenging for students to access financial aid. “Not-for-credit” programs are generally much faster to design and get approved by internal and external program regulatory authorities.

The pandemic has put community colleges in a particularly challenging environment. State and local budgets have been decimated by the COVID-19 pandemic. Students have delayed and canceled their plans for schooling in order to support themselves and their families. Even federal pandemic relief has left community colleges with a smaller piece of the pie compared to their proportion of students served. Enrollment declines have hit community colleges the hardest compared to 4-year colleges and universities.

Yet demand for non-degree credentials is growing especially with busy working adults juggling caregiving and paying their bills. Many Americans are looking to return to the labor market quickly.

But asking community colleges to do more with less is a lot like planting a vegetable garden without providing quality soil, sunlight, or water.

Fortunately, one long-used state financing strategy could work to sustain and expand quality non-degree credential offerings at community colleges—the revolving loan.

What is a “revolving loan” and how can they finance non-degree credentials?

Twenty years ago, Kentucky established a $1.5 million state-supported "venture capital fund" designed to help colleges jump-start online learning programs without having to go through sluggish budget procedures or apply for competitive, time-intensive federal grants.

Under the model, colleges could apply for interest-free loans to kick-start online projects. The Kentucky Community and Technical College System was one group that sought a loan. Compared to a traditional budget proposal process (which could take up to a year), KCTCS secured funding in a fraction of the time which allowed them to quickly capitalize on the booming online education market. If awarded, the college could have cash in hand within a month. The college would have two to three years to pay back the amount.

That was twenty years ago when online programs were the height of innovation in higher education, but these “revolving loan” structures could empower states to help finance new quality non-degree programs at community colleges.

In what scenario would a revolving loan be useful at a community college?

We have learned that one struggle for community colleges is in finding the “startup” funds for non-degree programs. Let’s say that American City Community College wants to start an ophthalmic assistant apprenticeship program at the behest of their local employers. The college needs to hire new faculty to create the curriculum, teach the program, and get the program recognized by the specialized accreditor.

The college also need to purchase all of the tools and equipment needed, so students can practice in their Related Technical Instruction (RTI) before they start at the employer work site.

The college has exceeded the amount of money in the budget they use for startup funds this year. The employers are willing to chip in some of the equipment but not all and they are unwilling to chip in funding for hiring and curriculum development.

Much like how KCTCS secured a revolving loan to finance its first online programs. American City Community College could secure a revolving loan to finance the startup costs associated with the ophthalmic assistant apprenticeship program.

Over time, American City Community College would pay back the zero-interest loan--keeping the state coffer sustainable.

Revolving loans are an innovative state-driven solution, but federal and private investments are still needed

To be sure, if we’re serious about restoring economic mobility and opportunity in this country, our states and federal government need to re-invest in quality public community colleges as a whole. Employers, too, need to do their fair share to pay for the training their companies need.

Automation, accelerated by the pandemic, has brought the future of work to our doorsteps. Over the next decade, many millions of Americans without college degrees will be forced to transition to “new” work. This “work of the future” will hopefully be higher-paying, more enjoyable, and associated with better benefits like paid sick leave and time off.

Quality non-degree credentials can help workers transition to work of the future. However, without a significant re-investment in American public 2-year (and 4-year higher education) system, our standard of living will decline and the United States will decline as a world leader.

Revolving loans are a worthwhile innovation for states to consider implementing if we are to expert our community colleges to pioneer quality, quick, and affordable non-degree programs.

Do you have other creative ideas for financing quality non-degree credentials at community colleges? Contact me at Jyotishi@NewAmerica.org or on Twitter @ShalinJyotishi.

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