Philanthropist MacKenzie Scott Combats Education Inequity with Hybrid Loan Model

MacKenzie Scott's $34 billion fortune has funded over $19 billion in philanthropy, but her latest venture circles back to a $1,000 loan she received in college. As a Princeton sophomore, Scott faced the prospect of dropping out without the funds to cover tuition. Her roommate, Jeannie Tarkenton, stepped in, securing a loan from Tarkenton's father. "I would have given MacKenzie my left kidney," Tarkenton recently told the Associated Press. "Like, that's just what you do for friends." Decades later, Scott has invested in Funding U, the lending startup Tarkenton founded to help low-income students avoid the same financial crisis.

Funding U's model diverges from traditional lenders by offering merit-based loans without requiring co-signers. Instead of relying on credit scores, the company uses algorithms to assess applicants' academic records, internships, and likelihood of completing college and repaying loans. This approach targets students who, like Scott, demonstrate potential but lack access to capital. "She's looking for innovative ways to create opportunity for those that don't have it," said Marybeth Gasman, director of Rutgers' Center for Minority Serving Institutions.

Scott's investment strategy in Funding U blends philanthropy with market-driven solutions. She provides the majority of "junior debt," covering 30 cents of every dollar loaned, while banks supply the remaining 70%. These philanthropists lend at concessionary rates, accepting lower returns and longer repayment periods to mitigate risk for larger investors. This hybrid model ensures Funding U remains a for-profit entity, allowing Scott to recoup her investment-just as she repaid Tarkenton's original loan.

The venture underscores Scott's broader commitment to "mission-aligned ventures" that address systemic inequities. Since her 2019 divorce from Jeff Bezos, she has prioritized investments in education and economic security, areas she described as "critical to ensuring students have access to higher education." Gabrielle Fitzgerald, founder of the nonprofit Panorama, which tracks Scott's giving, noted that the Funding U investment aligns with her philosophy of using "all the tools at her disposal to pursue her goals."

Tarkenton's vision for Funding U emerged from her work at an Atlanta-based adult literacy nonprofit, where she observed stark disparities in college completion rates among low-income students. She found the problem too vast for traditional philanthropy but too niche for major lenders to address. By combining philanthropic capital with regulatory incentives-banks contribute to meet community-lending requirements-Funding U bridges this gap. As detailed in the report, the investment reflects a long-term commitment to educational equity.

The investment also highlights a growing trend in impact investing, where wealthy individuals blend charitable intent with market mechanisms. Tarkenton advocates for philanthropists to "get a little messier" and adopt hybrid models that serve both profit and purpose. "I'm all about pushing philanthropists in a very aligned way," she said, emphasizing the need for scalable solutions to systemic issues.

For Scott, the Funding U partnership is more than a financial decision-it's a full-circle moment. In an October essay, she described the loans as "generosity- and gratitude-powered," reflecting on how Tarkenton's act of kindness influenced her giving. The ripple effect of that $1,000 loan, Fitzgerald noted, is a "reminder that helping your fellow humans is both a good thing to do at the time and something that could have a massive impact down the road." According to Fitzgerald, this investment demonstrates how personal relationships can shape long-term philanthropic impact.