The graduating class at Atlanta’s historically black Morehouse College got the surprise of a lifetime on Sunday when commencement speaker and billionaire Robert F. Smith announced that he wasn’t just there to give the nearly 400 graduating seniors a nice motivational speech — he was also going to pay off their student debt.
“On behalf of the eight generations of my family that have been in this country, we’re gonna put a little fuel in your bus,” Smith, the founder of the investment firm Vista Equity and the richest black person in the United States, told the newest graduates of the prestigious all-male college. “This is my class, 2019. And my family is making a grant to eliminate their student loans.”
Morehouse administrators have said that the exact cost of Smith’s gift is still being calculated, but early estimates have placed the amount at somewhere near $40 million. Even without an official figure, the gift marks the single largest donation ever made to an HBCU (historically black college and university), and Morehouse’s 2019 graduates quickly praised the donation as life-changing.
“This lifts a huge weight off my family’s back,” Deionte Jones, a 22-year-old 2019 Morehouse graduate with $25,000 in debt, told the Washington Post.
@RFS_Vista May have broken the Internet with his generosity and charge to pay it forward. https://t.co/6dsfw2kToi
— Morehouse College (@Morehouse) May 19, 2019
Smith’s gift comes as America’s student debt crisis is attracting increased attention from education policy experts, economists, and candidates in the 2020 Democratic primary.
And the fact that Smith, a black man with a net worth of nearly $5 billion, pledged to pay off the debts of hundreds of young black college graduates carries a powerful message about the transformative power of black wealth and how that wealth can create opportunities particularly for black students — who are more likely than other groups to face high levels of student debt.
That the gift was presented at one of America’s most prominent HBCUs, institutions with rich cultural and social history that are currently under increased financial strain, only adds to the symbolism.
Historically black colleges have been a powerful force for generations. Many are now struggling to stay afloat.
For generations, HBCUs — which were created to serve black students barred from attending white institutions in the years after the collapse of slavery — have been one of the most significant contributors to the black middle class; a large number of America’s black doctors and lawyers have attended HBCUs.
These institutions also have a rich connection to black history, with schools like Morehouse often highlighting the attendance of prominent figures like Martin Luther King Jr. and director Spike Lee.
But in recent years, many of these institutions have been thrust into a serious financial crisis as schools deal with falling enrollment and increased operating costs. The issues have put some schools, like North Carolina’s Bennett College (a historically black women’s college founded in 1873), at risk of losing their accreditation, while others have drastically raised tuition to stay afloat. And these issues have led many students to take on a mounting pile of student loan debt in an effort to get a degree.
Part of the problem here is funding; compared to larger four-year colleges, HBCUs have far smaller endowments. These schools also have less financial support from alumni, largely because a combination of discrimination, lower pay, debt, and other financial obligations has created an environment where black college grads often have a harder time building wealth than their white peers. While HBCUs have turned to the federal government for increased financial support, that aid hasn’t been given by recent administrations.
Still, the financial struggles of HBCUs are starting to get more attention, and 2020 Democratic presidential candidates and other politicians have stepped forward with various plans to address the issue. Sen. Kamala Harris (a graduate of Washington, DC’s historically black Howard University) has proposed increasing funding to HBCUs to help train black teachers. And Sen. Elizabeth Warren has proposed an ambitious plan to address student debt that includes giving HBCUs $50 billion in funding.
But in the interim, a combination of crowdsourcing and individual donations has been forced to make up for the HBCU funding gap. In addition to Smith (who previously donated $1.5 million to Morehouse earlier this year), there’s been a growing number of high-profile donations to HBCUs: People raised more than 8 million for Bennett College earlier this year, and billionaire Ronda Stryker made a $30 million donation to Spelman College last December.
The student debt crisis is hitting black students at HBCUs especially hard
The Morehouse gift stands out not only for the size of the donation but also because it is specifically meant to address student debt, an issue that is seeing increased national attention and has hit black students particularly hard in recent years.
Recent data from the Federal Reserve shows that Americans currently owe more than $1.5 trillion in student loan debt. That’s more than Americans owe for cars ($1.1 trillion) or credit cards ($977 billion). And student debt has effects that go beyond a single borrower; due to the sheer expense of paying off loans, Americans are now less likely to own homes or make other large purchases that boost the economy.
These pressures are even more pronounced for black students. An oft-cited 2017 analysis from the liberal Center for American Progress found that black students are significantly more likely than white or Latino students to take out student loans. The analysis also noted that black students are more likely to default on a federal student loan within 12 years of starting college, and that by the time they default, these students owe more than the cost of their initial loan.
A Brookings Institution analysis published in 2018 found that black college graduates with bachelor’s degrees default on their loans at five times the rate of white graduates (21 percent to 4 percent), and that a black college grad is more likely than a white college dropout to default on their loan.
While this is an issue for black students broadly, largely fueled by students attending two-year and for-profit colleges, research has shown that black HBCU students are especially vulnerable to student debt. An April 2019 report from the Wall Street Journal noted that the median HBCU alumni held roughly $29,000 in student debt by the time they graduated. That’s 32 percent higher than the median for students from other four-year schools.
“America’s 82 four-year HBCUs make up 5% of four-year institutions, but more than 50% of the 100 schools with the lowest three-year student-loan repayment rates,” the report added.
It shows that black students in general, and HBCU attendees in particular, are taking on far more debt than other students, and that black students often struggle to pay off this debt after graduation.
Morehouse students described being subjected to this debt. One student with more than $200,000 in debt told the Associated Press that Smith’s announcement “was like a burden had been taken off” and that he cried when he realized his debt would be paid.
For the class of 2019, the fact that this burden no longer exists creates a serious opportunity — and, as Vox’s Dylan Matthews notes, a kind of “natural experiment” that allows for a comparison between Morehouse students who graduated with debt and those who just had their debt erased. As Morehouse president David A. Thomas said Sunday, Smith’s gift gives students “the liberty to follow their dreams, their passions,” without a large debt hanging over their heads.
But Smith’s gift, while undoubtedly valuable, highlights how infrequently such a massive gift is given, and the difficulty of using the financial benevolence of billionaires to solve systemic issues.
As the Atlantic’s Adam Harris notes, “one billionaire can only help so many, and more than 40 million people in the United States have student loans. And no graduation gift can help the millions of young people who never complete their degree.”
It’s clear that even as the celebration of the Morehouse debt cancellation continues, a true solution to the student debt problem, and its particular impact on black students, will require much more.