Federal officials have recently unveiled two new grant programs to support the design of “pay for success” models that would allow investors to pour money into  preschool and career-and-technical education, and secure financial returns if there are positive results.

The U.S. Department of Education, in a public notice released this month, said a $2.8 million grant program will provide awards of between $200,000 and $400,000 to individual state or local applicants to study the feasibility of pay for success strategies in preschool services.

A similar notice was floated earlier this summer by the department to study the feasibility of pay for success in career-oriented education programs. Those grants, funded at a total of $2 million, could focus on supporting career academies and early-college high schools, among other efforts.

In addition, Department of Education officials tell EdWeek Market Brief that the agency’s office of English-language acquisition is staging its own research project to gauge how pay for success could be used for the populations it serves. The department says it will hire an outside contractor to take on that research.

The department’s preschool grant program hews to the basic model for pay for success programs.

It offers applicants money to propose initial designs for allowing private investors to put money into preschool programs, in the hope of reducing the number of special education students placed in elementary school–among other positive academic and social outcomes–thus potentially cutting costs to taxpayers.

Pay for success has been tested in a variety of areas of government in the United States and Britain, including efforts to reduce prison recidivism. A number of state and local communities have applied the strategy to education. The best known has played out in Utah, where a partnership involving Goldman Sachs, a school district, and a number of community charities has sought to reduce special education enrollments through preschool expansion.

The investment model is viewed skeptically by some in the education community, including special education advocates. Some have questioned the metrics used to gauge success in reducing public costs, while others worry that pay for success can create skewed incentives to keep students out of special education who might need those services.

Setting Up Guardrails

Department officials, who developed the feasibility pilot in consultation with the Department of Health and Human Services, seemed well aware of those fears in laying out rules for the new grant programs.

For instance, the agency said the preschool grants will only support proposals that meet “rigorous safeguards” for protecting the needs of special needs students, including making sure they receive required services under the federal Individuals With Disabilities Education Act.

Possible safeguards to protect students, the department said, could include not only rigorous evaluations of the programs, but an analysis of longer-term effects of  preschool interventions, such as the impact on students’ third-grade reading achievement.

The Every Student Succeeds Act, a massive federal law signed by President Obama in December, has language that allows pay for success programs. The law doesn’t spell out what specific areas of education would be eligible for those investments. But it includes pro-pay-for-success wording in a section of Title I supporting prevention/intervention programs for youths; and in the Title IV block grant section focused on student safety and health.

The Obama administration seems keen on exploring the concept’s possibilities. As EdWeek Market Brief reported recently, top Department of Education officials in June held a meeting in which they discussed options for using pay for success in areas such as preschool, career-and-technical education, English-language learning, and helping at-risk youth.

In announcing the preschool grant program, the department also said it will consider applicants who have other positive outcomes in mind besides reductions in special-education services. Those outcomes could include increases in readiness for kindergarten; reading and math gains; improved social and emotional skills (which has received increased attention under ESSA); reductions in grade retention and disciplinary actions; and improved graduation rates.

While the deadline for applying for the career-and-technical education pay for success program passed earlier this month, applicants for the preschool program still have time to put forward ideas. They must give a notice of intent to apply for the preschool grants by September 12, and applications are due on Oct. 6.

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See also:

• New Federal Law Opens Doors to Investors, Including Private Companies
• Feds Ramping Up Pay for Success Options for Preschool, English Language Learning
• The Every Student Succeeds Act: A Guide for K-12 Companies