Steve Klinsky spent 25 years building New Mountain Capital into one of the most respected private equity firms, with $60 billion in assets under management spread across hundreds of portfolio companies. His investment track record speaks for itself: A supply chain software company he bought for $600 million was sold for more than $8 billion. A life sciences company it backed went public with a $3 billion gain. The firm often says that it has never had a portfolio company go bankrupt.
But ask Klinsky about what he’s most excited about right now, and he’ll tell you about a website. ModernStates.org — the online platform of his Modern States Education Alliance — has quietly reached 800,000 people and awarded 25,000 years’ worth of free college credits, all without spending a dollar on advertising. And, according to Klinsky, this is just the beginning.
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“This is just beginning,” he said in a recent interview with Goldman Sachs’ Great Investors podcast, noting that it all happened without spending a single dollar on advertising.
“There’s $1.7 trillion in student debt,” said Klinsky, a prominent philanthropist, when talking about what motivates him. “It’s an unrealistic number.”
The idea is elegantly simple
Modern States didn’t invent anything new, Klinsky explained to Alison Mass, president of Investment Banking, Global Banking and Markets at Goldman.
It was based on a little-known but decades-old program called CLEP exams — College-Level Examination Program tests administered by the College Board, the same organization responsible for the SAT (US college admissions test).
The exams cover dozens of subjects, from college algebra to American literature, and have been around for 50 years. When you pass one of them, most US colleges and universities grant credit — without the need to pay tuition.
The problem is that almost no one knew about it, and even fewer people were able to prepare adequately.
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Klinsky’s solution: Hire the best professor in each of the 32 subjects, create a free online course for each, and publish them on ModernStates.org. Students have access to free courses, reading materials and practical exercises. If they pass, Modern States still pays the $100 CLEP exam fee.
The numbers are impressive. “If you’re an Abraham Lincoln, completely destitute but ambitious, you can get a year of college this way and save a year of time and $30,000,” Klinsky said.
Why is a billionaire doing this
Klinsky, whose net worth Forbes estimates at $4.9 billion, didn’t get into educational philanthropy through guilt or appearance. Your path there is personal.
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Growing up in Detroit, his seven-years-older brother, Gary, helped him extensively with his studies after school. “It had a huge meaning in my life,” Klinsky said.
Gary died of a genetic disease while Klinsky was still in graduate school at Harvard. And in 1987, when Klinsky became a partner at his first major private equity firm, Forstmann Little in New York, one of his first initiatives was to create after-school activity centers in the region’s most violent neighborhoods, named in Gary’s honor. They still work today.
This practical experience in East New York — a neighborhood that, at the time, had more homicides than the entire state of Nebraska — convinced him that the problem for the most disadvantaged students in the United States was not the children. It was the system. “When I visited the school,” he said, “the kids were fantastic. The teachers were fantastic.”
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Then came charter schools (institutions with public money, but managed by private individuals). Next, a deeper focus on higher education. Then Modern States.
Redemption of a sector
Klinsky’s philanthropy is harder to ignore when one considers its origins. He is, by his own admission, a character from Barbarians at the Gate — the classic business book that became the leading critique of the excesses of private equity in the 1980s, chronicling the aggressive $25 billion acquisition of RJR Nabisco (then the largest in history) and the era of debt-driven deals and high fees that turned Wall Street into the cultural villain for an entire generation.
He was there. Saw everything up close. And he spent the next 40 years building something deliberately different.
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New Mountain Capital was founded with an explicit rejection of the old model — less debt, no financial engineering, a focus only on non-cyclical sectors, and a constant attention to actually improving the companies it acquires.
Klinsky has publicly advocated this model for years, including as chairman of the American Investment Council, the body that represents all 5,000 U.S. private equity firms, and in a Harvard Business Review article detailing how his firm took a supply chain software company from $600 million to more than $8 billion in value.
“Private equity has gone from being a form of financing to a form of business,” he told Mass on the Goldman Sachs podcast.
His free education initiative, in this context, is not a departure from his Wall Street identity, but more an expression of what he has always done: identify something that doesn’t work, roll up your sleeves and build something better.
Just getting started
Despite its scale, Modern States remains one of philanthropy’s best-kept secrets. Klinsky attributes its growth entirely to word of mouth — 800,000 users reached it organically, proof of success for a model that he believes can grow much more.
At a time when student debt has become one of the main anxieties of a generation, the timing of the program could not be more relevant. Even with lower tuition at publicly managed universities — like Purdue, in Indiana — the cost is around $33,000 per year, Klinsky noted.
Modern States will not solve the student debt crisis alone. But, for the 800,000 people who have already used it, it may be the most practical solution that anyone has actually managed to offer.
For this report, Fortune journalists used generative AI as a research tool. An editor checked the information for accuracy before publication.
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