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Credit Enhancement for Charter School Facilities Program

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Since 2002, the U.S. Department of Education (Department) has awarded 34 Credit Enhancement for Charter School Facilities grants totaling approximately $243 million. Every December, these grantees submit a performance report to the Department describing their progress through September 30 of that year. After receiving and reviewing the annual reports, the Department reconciles and consolidates performance data. The cumulative accomplishments of these grantees from inception of the program through September 30, 2012, include:

  • providing 466 charter schools, approximately 8 percent of charter schools nationwide, with access to financing to help them acquire, build, lease, or renovate school facilities; and
  • supporting or enabling $3.19 billion in total financing for charter school facilities.

As the activities supported by the grants progress over the grants’ 10- to 30-year life spans, and grant funds recycle, we anticipate the benefits the funds produce will continue to grow. In addition, the program will continue to provide financial support by creating a facility financing market by developing models, financing structures, informing capital providers about the charter school sector, demonstrating the creditworthiness of schools, and attracting new capital.

The Department’s data on defaults under the program, as well as data from the field, show very low default rates by charter schools. Under the Credit Enhancement for Charter School Facilities Program, only $2.21 million, or less than one percent of all funds awarded, were lost to default. This low default percentage suggests that, contrary to the perceptions of private lenders, charter schools are not risky borrowers. The Credit Enhancement for Charter School Facilities Program thus addresses a mismatch in the market between the perception and reality of charter school creditworthiness and, over time, is likely to produce data that will encourage private lenders to make loans and other financial arrangements with charter schools without the need for credit enhancement.

Last Modified: 02/03/2014