What if Funding School Facilities Didn’t Require More Money?
A simple explanation of how credit enhancement works and why it can unlock better financing for schools
Ena Kumar, Senior Advisor Learning Finance
If I mentioned the $20 million grant we recently received, you might ask:
How will you spend the money?
That’s a fair question. Most funding is meant to be spent.
In this case, though, we don’t spend the money. We keep it.
We keep the funding in an account and use it for credit enhancements.
Put simply, that means we allocate a portion of the fund to back a school’s loan. This gives lenders more confidence and, in turn, leads to better interest rates and more flexibility for the school.
The Common Challenge
School leaders don’t struggle to get real estate projects off the ground because they lack vision.
They struggle because financing facilities are complex, expensive, and often out of reach on reasonable terms.
Even strong schools can find themselves:
Paying higher interest rates than they should
Facing more restrictive loan terms
Or unable to access financing at all
This is especially true in communities where:
Academic outcomes are still improving
A high percentage of students qualify for free or reduced-price lunch
In other words, the places where high-quality school options matter most.
The Common Truth Behind The Challenges
What lenders are really responding to is not just the project itself. They are responding to perceived risk.
If a lender feels confident in the deal, terms improve.If they feel uncertain, costs go up or access to financing disappears all together.
So the question becomes:
What if we could reduce that risk without changing the project?
What Credit Enhancement Actually Is
Credit enhancement is a simple idea, even if the mechanics behind it can get complex.
We don’t give money to schools. We don’t pay for construction.
We stand behind the financing. You can think of it as a guarantee.
If something goes wrong with a project, a portion of the loss is covered. That gives lenders more confidence to say yes and to offer better terms.
And when projects succeed, which is the goal, that money stays intact and can be used again.
It’s less like funding a project and more like backing it.
Why this matters
This approach can unlock:
Better interest rates
More flexible loan terms
Access to financing that might not otherwise exist
For schools, that can mean the difference between:
A project moving forward or stalling
Resources going into classrooms or into financing costs
And because the same dollars can support multiple projects over time, the impact compounds.
Where we’re focused
Not every project is the right fit.
We are prioritizing schools that are:
Serving communities with higher levels of economic need
Located in areas where academic outcomes are still improving
This is part of the commitment we made when we applied for the funding, and it is central to how we think about the work.
What happens next
We’re beginning to work with a small number of schools over the next several years.
In the near term, that means:
Identifying projects where this kind of support can make a meaningful difference
Partnering with lenders who see the value in structuring deals this way
If you think your school could be a good fit, or you’re a lender working in this space, let’s start a conversation.
You can reach out to Ena Kumar, Program Director, at kumar@pswrx.org.
Because sometimes the barrier is not the project itself.
It’s how the risk is structured around it.
