Missing Middle

Charitable grants and market-rate investments aren’t getting it done in the education-to-work space. Could more flexible capital fill the gap? Also, CodePath doubles down on tech training and finds success, the workforce angle in Trump’s moves to dismantle the Education Department, and Teach for America’s CEO writes about trying on purpose-driven careers. (Subscribe here.)

Sustainable Funding for Workforce Solutions

Despite all the interest in alternatives to the four-year degree, few sustainable innovations have emerged in the education-to-workforce space, particularly large-scale ones. And a lack of money is a big part of the problem.

Venture capital and private equity–backed solutions largely have fizzled, because serving lower-income learners rarely generates market-rate returns. And inconsistent, piecemeal grants from foundations can’t keep most organizations afloat.

“Don’t blame the player. Blame the game,” says Jess Hinkle, SVP of strategic investments for the Strada Education Foundation.

The fix for this funding gap lies in between the false binary of those two forms of investment, according to Tyton Partners, a consulting firm focused on education and workforce development. 

Catalytic capital—flexible, risk-tolerant investments—can be a transformative force to unlock and scale workforce solutions for the highest-need populations, Tyton argues in an April report produced in partnership with Strada and World Education Services. This approach prioritizes social impact over risk-adjusted returns and has been used for decades to bridge market failures in other sectors, including community development finance.

“There’s another way to do this,” says Andrea Mainelli, a senior advisor at Tyton and the report’s author. “We need a more patient form of capital.”

Types of investments cited in the report include loan guarantees, low-interest loans, working capital loans, and equity investments in early-stage businesses with limited addressable markets. Another option is the use of first-loss capital, to de-risk and attract market-rate investors.

The goal, says Mainelli, is to recycle funds and earn some returns while creating a self-sustaining financial vehicle.

Social Finance and its outcomes-based loans fit this profile. For example, Google three years ago invested $100M in a job training fund through the nonprofit. Merit America offers its skills training, career services, and wraparound supports to learners as part of the project. The nonprofit Merit America is cited by the report as a model that benefits from catalytic capital. So is Per Scholas, a nonprofit tech training provider focused on working learners without degrees.

Catalytic capital helps prove that organizations have a working approach in this tricky space, which then helps bring in more private sector funding, Mainelli says. It also could attract public money. (The U.S. spends $20B each year on all federal employment and training programs, less than 0.1% of GDP, a spending level that lags other developed countries and even the U.S. decades ago.)

Impact funds that feature the flexible, patient approach described in the report include JFF Ventures and Reach Capital. And Clasp, which offers employer-sponsored loans for talent development, gets a shout-out by Mainelli.

The timing is right to go big on catalytic capital, Hinkle says. Much of the “tourist capital” has moved on amid a “mismatch of expectations,” she says, either going upstream with investments focused on wealthier students or leaving education altogether. “Venture capital is looking for scale, scale, and to go national.”

Strada is all in on the report’s investment strategy, says Hinkle. “We need to find opportunities to replicate, not just scale.”

Mainelli says recent shocks to the workforce education and training ecosystem—including the pandemic, turbulent funding in the Trump administration, and the rise of AI—have served as a wake-up call. Corporate giants like Walmart, Google, and Amazon are paying close attention, and she says big business could do much more in joining philanthropy as it kick-starts promising models.

The Kicker: “This feels different,” says Mainelli. “Talent is so fundamental that I think people are going to take this into their own hands.”

Tech Education for ‘Diamond-Shaped’ Hiring

While some tech training programs are pivoting away from the industry as the pool of entry-level jobs shrinks, CodePath is doubling down. The nonprofit expects to serve about 20K students this year and has grown 50–100% each year since its founding in 2017, according to CEO and co-founder Michael Ellison. Annual salaries for graduates are averaging $92K one year out.

The nonprofit is growing, in part, because its skills-focused training and career prep have always been delivered alongside a computer science degree. CodePath’s goal wasn’t just to get students a job; it was to get them a better job.

And as AI raises the bar on what counts as entry-level skills in many roles, more colleges and even entire states are looking to give their students that edge. As a result, CodePath is increasingly embedding its offerings directly in universities’ computer science programs, rather than just offering stand-alone courses and support directly to students.

“We excel at bridging the gap between computer science and the workforce,” Ellison says. “That gap being bigger is actually very much a tailwind for us.”

Even as it plans to grow, though, the organization laid off some staff this week to reorient to the changing market. “We continue to hire for roles, and we are actually increasing total headcount,” CodePath said in a statement. “The changes to the organization ensure we are set up to scale quickly to meet the increased demand.”

(This story was originally reported before the layoffs and has been updated.)

In Maryland, which recently partnered with CodePath, Seeyew Mo describes the current hiring landscape as a diamond, as opposed to the pyramid it used to be. Hiring managers are looking for middle-skill workers, while entry-level work gets taken over by AI, says Mo, senior adviser of the Cyber Maryland program at the state’s Department of Labor. 

That means students need real-world experience while they’re still in college so they can apply directly for those midlevel jobs upon graduation. 

With funding from Blue Meridian Partners, CodePath is working with the Maryland Higher Education Commission and the state’s Labor Department to enroll at least 2K students in its programs by 2027, expanding its footprint in the state fivefold. Cybersecurity was an obvious focus for the work—with the headquarters of the National Security Agency in Maryland and the nation’s largest concentration of cybersecurity workers in the region around Washington, D.C.

To better prepare students to work in the industry, they’ve created a new AI core course, an advanced-level course where students will work on specific AI projects with different companies in the area. At Bowie State University, for example, CodePath is embedding its curriculum in the first-year web development course in the computer science department. By the end of the semester, students will showcase their projects, an opportunity traditionally reserved for seniors.

“That’s why this partnership is unique,” Mo says. “It’s not just about training and education; it’s about closing the gap so we can connect the educators and employers and have the necessary policy so that learning can lead to real-world experience and workforce opportunity.”

The partnership aligns with the Labor Department’s larger goal of connecting students with employers earlier in their education and finding innovative ways for students to get work experience, while benefiting local businesses. Last month, the department announced a new cyber and AI clinic in which students work on projects for local businesses that can’t afford to hire a full-time cybersecurity expert. These opportunities, in addition to traditional internships, can give students the needed skills to apply for midlevel roles, and employers benefit from their burgeoning expertise, Mo says.  

For its part, CodePath jumped at the chance to make a change across an entire state, instead of going institution by institution or having to directly recruit students, says Tori Darby, senior manager of university partnerships at CodePath and lead on the Maryland initiative.

“This is the first time that we have had the backing of the state government, which is really helping us embed in these systems in ways we haven’t been able to do before,” Darby says.

California, Florida, Texas, and Washington are next on CodePath’s list. —By Colleen Connolly

Preparing Americans for Jobs

The Trump administration justified some of its moves this week to “break up the federal education bureaucracy” as being about workforce education.

The six interagency agreements announced Tuesday include a partnership under which the U.S. Department of Labor will administer 14 higher education programs, ranging from TRIO to FIPSE. The relocation of those programs follows steps earlier this year to move the administration of CTE grant funds to the Labor Department.

Labor shortages and a “commitment to transforming the federal government’s approach to workforce development” are the backdrop for the Trump push to create a coordinated system for federal postsecondary and workforce programs, the Education Department said in a news release. “These grants will help students from all walks of life obtain the credentials and career training they need to prosper and contribute to the American economy.”

The administration also used similar workforce language when describing the shift of elementary and secondary education funding streams to the Labor Department, which the Education Department said would better align education and workforce systems.

Reactions among lawmakers were predictably partisan. Few responses from workforce groups and leaders had emerged by Wednesday afternoon. But Brooke DeRenzis, CEO of the National Skills Coalition, criticized the move, saying it risks disrupting education and workforce programs.

Open Tabs

Government Money
Unstable public funding is perhaps the most pressing challenge workforce organizations face, according to workforce pros brought together by the Federal Reserve Bank of Kansas City. Federal and state programs are often inconsistent funding sources, participants said, with money recently being delayed or rescinded. As a result, some workforce groups are in survival mode, while many are retrenching rather than piloting new models or expanding proven strategies.

Skilled Trades
Ford dealerships currently have 5K unfilled mechanic jobs, many of which pay $120K a year, Jim Farley, CEO of the Ford Motor Company, said on a podcast produced by the business school at University of Tennessee at Knoxville. He blamed a systemic shortage of training and education options for the skilled trades. “We are in trouble in our country. We are not talking about this enough,” he said. “We are not investing in educating a next generation of people.”

Short-Term ROI
Students who enroll in short-term, job-focused training through noncredit community college programs experience modest but meaningful earnings gains and greater likelihood of being employed after training, finds a study published in a peer-reviewed journal of the American Educational Research Association. Using data from Texas, the researchers found an average wage gain of roughly $2K per year (or more than 4%) during the two years after training.

Localized ROI
More colleges clear ROI benchmarks when local labor market income data is used to assess wages rather than statewide data, find researchers at the University of Wisconsin at Madison. Their report looked at three ROI metrics from the Postsecondary Value Commission, finding that the shift to localized data tends to particularly benefit broadly accessible public colleges that cost less to attend and enroll higher shares of Pell Grant recipients.

WIOA Wages
The Colorado Workforce Development Council has released earnings data for WIOA-funded training providers in the state. The data covers seven years of outcomes across 300+ training providers, with numbers for both what participants earned before enrolling and one year after completion. The release follows the unveiling of a new earnings dashboard for training providers from the Colorado Equitable Economic Mobility Initiative.

Job Moves
James Kvaal has been named VP of the national program at the Carnegie Corporation of New York. The under secretary of education during the Biden administration, Kvaal also previously was deputy director of domestic policy for the Obama administration and was president of the Institute for College Access and Success.

Chike Aguh has been hired as head of innovation strategy for gap closing startups at the Kapor Center. The chief innovation officer at the U.S. Department of Labor during the Biden administration, Aguh also has been vice chair and commissioner of the Maryland Higher Education Commission and a senior adviser to the Project on Workforce at Harvard.

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