This profile was prepared when Felipe Vergara was elected to the Ashoka Fellowship in 2006.
The New Idea
Felipe is applying a simple principle to the field of education finance: profit attracts capital. Through Lumni, Felipe is managing the first profitable education investment funds, and in the process is testing, refining, and demonstrating the tools that other groups will need to do the same. The cornerstone of Felipe’s innovation, the “human capital contract”, eliminates the risks to both students and investors that otherwise deter private investment. In exchange for education financing, these legally binding agreements require students to pay a fixed percentage of their income over a pre-determined number of months after graduation. For students, human capital contracts do away with both the need for collateral and the threat of burdensome debt associated with traditional loans. The effect makes unemployment and underemployment less ominous, but also allows students to pursue their dreams, whether drams of business success, entrepreneurial pursuit, or contribution to the social good. For investors, they essentially allow the purchase of equity shares in students’ post-college financial success. Lumni operates as a node, facilitating win-win financing opportunities between Universities, private investors, and students. To date, Lumni is the in the design or implementation phase for 10 funds in Chile, Colombia, Mexico, and the US. Through this global effort Felipe is working to demonstrate the potential for HCC-based funds to transform education financing around the world.