Social entrepreneur Michael Grossman has heard a similar refrain from employers across the country lately: There are not enough skilled workers.

Hospitals are unable to find nurses and technology specialists. Trades like welding, plumbing, electrical work and HVAC installation struggle to attract new technicians. Newer fields like cybersecurity need specialists with new skills to manage evolving technological risks.

“I was talking to a hospital CEO a couple of weeks ago — and hospital CEOs are not super hyperbolic types — but he was describing this workforce situation as an ‘existential challenge,’” Grossman says. “We keep hearing that across industries.”

As managing director of Social Finance, an impact finance and advisory nonprofit, Grossman has worked on several public-private partnerships to create job training programs to upskill workers for key professions.

Among those is a partnership with the state of New Jersey called the Pay It Forward program: a no-interest, fee-free educational loan for people earning less than $65,000 per year to enroll in job training courses in a number of critical industries. The loans include a built-in forgiveness component — borrowers only pay back the funds if they make above a certain salary each year, and pay nothing after five years.

Now, Social Finance is working on setting up similar programs in cities and states in different parts of the country. And though it might be hard to admit New Jersey has an idea we should steal, it turns out Philly — which continues to struggle with talent shortages in fields from health care to teaching (and in all manner of City jobs) — could learn something from the state next door.

Putting dollars in student’s hands

The way Pay It Forward works is simple: Students apply for and enroll in one of four programs offered by three New Jersey community colleges. If they make less than $65,000 per year, they qualify for and receive a Pay It Forward loan to cover the costs of their educational expenses.

Once training is completed, participants who earn more than $49,290 per year for a household of three or more pay back their loans at a rate of 10 percent for up to five years. After five years, they pay nothing. And if they don’t earn more than the minimum salary they pay nothing until they do. Grossman estimates that the program will recoup about 30 percent of its funds over the five years of the program’s life cycle. If the program proves successful, the state will consider allocating more funds to help keep it running in perpetuity.

Pay It Forward loans can be used to pay for four different job training programs: a two-year nursing program at Hudson County Community College; a 10-month cyber security program at the New Jersey Institute of Technology; and nine-month HVAC and welding technology programs at Camden County College.

In addition to the no-interest loans, the Pay it Forward program offers wraparound mental health services, emergency aid funds and a small grant of between $375-$500 per month to help cover some expenses, like transportation costs to get to school or wages lost while they attend class. The amount a student receives varies on the length of their training, with those enrolled in longer courses receiving more support.

Providing people with stipends while they attend full-time job training increases the likelihood that an individual will complete their studies and earn a job after graduation. Funds became available to students in August 2022.

The programs were chosen based on several criteria, including the school’s graduation records, the number of students who found jobs after graduating from these programs, the average salaries for jobs in these industries, and the demand for workers in these fields.

Forty percent of the state’s nursing workforce is expected to retire over the next 10 years, according to an NJ Spotlight News Report. This will create one of the most significant shortages in the country, with a need for over 10,000 nursing professionals. Meanwhile, trades like HVAC and welding have long struggled with hiring while paying decent wages. HVAC technicians make an average of $57,906 per year in the state, and registered nurses earn an average of $99,760 per year, according to data from Glassdoor.

So far, about 90 students have enrolled in job training programs and paid for them using Pay It Forward loans. The first round of funding will be able to support about 600 individuals over the next five years.

“These are really good middle-class jobs that people can get with a medium-duration training program,” Socolow says.

A public-private partnership

The idea for New Jersey’s Pay It Forward program was born out of a 2020 meeting between Gov. Phil Murphy and CEOs from New Jersey’s largest employers.

Back then, there was a lot of uncertainty over how Covid would affect the state’s economy. Nationwide, layoffs surged in the early days of the pandemic, and employers expressed concerns about people withdrawing from the workforce due to various factors, including burnout from high-stress working conditions.

Nursing, in particular, has been affected by hundreds of workers leaving the industry. Last year, 30 percent of nurses left the profession, according to a Forbes report, and the Mayo Clinic Well-Being index found that 38 percent suffer from burnout.

Together, New Jersey officials and a group of business leaders, now known as the state’s CEO Council, created several initiatives to help support the local economy in the wake of the virus. Most notable was the Pay It Forward program, a $12.5 million workforce development fund designed to provide loans for people enrolling in training in critical industries.

The CEO Council donated $5 million to the fund while the state contributed $7.5 million over the next five years. In his budget address on March 1 of this year, Murphy committed another $2.5 million to the venture, bringing the state’s total to $10 million in support (a small initiative given the state’s $50.6 billion budget for fiscal year 2023).

“It’s very much about helping populations that have barriers to employment that could not engage in these relatively higher cost training [programs],” says David J. Socolow, executive director of the Higher Education Student Assistance Authority. “It was an overall idea about what can we do to help individuals prepare for high growth, in-demand jobs.”

Though they had the funds in hand, creating a new loan program took some work. Several state agencies — from public, community colleges and the state’s higher education student assistance authority to the Department of Labor — were involved, as were a number of private companies. A third party was needed to administer the loans and create an application process for schools interested in offering programs eligible for Pay It Forward funds.

That’s where Social Finance came in. The state had heard about the Boston-based UP Fund, which provides loans for career training programs. Students pay back the loans only if they secure and keep a job above a certain salary; that money goes back into the program to provide loans for other people, making it somewhat self-sustaining.

The state of New Jersey wanted something similar, and Social Finance helped the state set up the public-private partnership, finding a loan administrator and managing communications between private companies and the various state agencies involved.

Or as Grossman says, “We put all the pieces together.”

Expanding to other cities and states

Though New Jersey’s Pay It Forward initiative is still in its early days, Social Finance has been working to bring similar no-interest, fee-free job training loan funds to other locations.

They’ve already partnered with United Way in Miami to launch a fund that provides similarly structured loans for coding training programs and are in talks with several other cities and states. The structure of the program varies by city and state, with some loan programs receiving funding entirely from nonprofits and others forming with a public and private sector partnership, like New Jersey’s.

While Philly isn’t yet among those cities, Socolow and Grossman see potential for a Pay It Forward fund here. The city already has a few different workforce development programs, including the Rebuild program, which offers paid training for people of color and women in the construction and trade industries, though it’s fairly narrow in scope.

With a large healthcare industry, Philly faces some of the same nursing shortages as New Jersey. And like Miami, Philadelphia already has a strong tech training infrastructure, with a number of bootcamps and coding courses. A Pay It Forward program could help the city bring job training opportunities to more people and in a larger array of industries.

Grossman says that Pay It Forward educational loan initiatives tend to have the most success when they listen to the hiring needs of area employers. Philadelphia’s workforce development board, Philadelphia Works, too, might be able to identify several industries facing shortages of skilled workers.

“There’s a possibility to do this now,” Grossman says. “When there’s a lot of significant local employer demand that pushes the public sector to act is where we find a lot of traction.”

Corrections: An earlier version of this story contained two errors. It had last year’s minimum salary for students to be required to pay back their loans. The 2023 minimum salary is $49,290 for a household of three or more. It also misstated Grossman’s estimate of percentage of funds the program will recoup annually. His actual estimate is 30 percent — over the five years of the program’s life cycle.

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