This federal program provides grant funds on a competitive basis to public and nonprofit entities to develop innovative credit enhancement models that assist charter schools in leveraging capital from the private sector. Program funds may not be used for the direct purchase, lease, renovation, or construction of facilities. Instead, funds must be used to attract other financing for such purposes. Examples include guaranteeing and insuring debt for charter school facilities, guaranteeing and insuring leases for personal and real property, assisting facilities financing by identifying potential lending sources, encouraging private lending and other similar activities, and establishing charter school facility “incubator” housing that new charter schools may use until they can acquire their own facilities.
To date the Credit Enhancement Program has made 50 awards to 24 public and nonprofit entities totaling approximately $298 million in 15 competitive rounds.
According to the latest available U.S. Department of Education data, grantees have provided 566 charter schools with access to financing to help them acquire, build, or renovate school facilities, leveraging $4 billion on behalf of these schools.
Of the 566 charter schools that have received credit enhancement through the program, 28, or 5%, have gone into either actual or technical default. However, as of September 30, 2016, only 16 of these defaults have resulted in an actual loss in funds, with losses totaling $7 million, representing 2.35% of the $298 million in grant funds awarded and 0.17% of the $4 billion in financing leveraged.