In 2006, in a presentation to ReadyNation marked “Strictly Private and Confidential,” Paul Sheldon of Citigroup proposed a new way to finance preschool: early childhood student loans.
Non-profit organizations could borrow from banks or student loan companies, said Sheldon, and then offer loans to government organizations or individuals. Then, the loans could be pooled and turned into asset-backed securities, and – voila! – an early childhood education market would be created, worth as much as 10 billion dollars.
The idea of preschoolers saddled with debt, however, was clearly going to be too controversial.
Over time, Citigroup’s model was reworked into the more palatable “social impact bond,” which are now proliferating across the country.
These bonds, which are really private loans made to government or non-profit agencies with repayment contingent upon pre-determined “outcomes,” are sold under the premise that they can help tax-payers save money in the long-run by preventing…
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