After billionaire Robert F. Smith announced he would pay off the student loan debt for Morehouse College’s 2019 graduating class, other donors may be inspired to address the rising cost of college and the long-term impact of student loans, experts say.
“There will be more conversations about how philanthropy, as well as public policy, need to become more active around access to and cost of colleges for low-income African American students,” says Una Osili, associate dean for research and international programs at Lilly Family School of Philanthropy, Indiana University.
Large student loan debt can have a serious, long-term impact on the future of college graduates, making it difficult to start building careers, launching businesses, and investing, Osili says.
Smith, 56, an African-American billionaire and founder of the investment firm Vista Equity Partners, on Sunday announced that he would establish a grant to eliminate student loan debts for this year’s 396-member graduating class of Morehouse, an all-male historically black college in Atlanta.
“On behalf of the eight generations of my family who have been in this country, we’re going to put a little fuel in your bus,” Smith said at the commencement ceremony while being awarded an honorary doctoral degree from the college. “And let’s make sure every class has the same opportunity going forward because we are enough to take care of our own community. We are enough to ensure we have all the opportunities of the American dream.”
The school’s annual tuition and fee amount to $28,000. The exact amount of the grant has yet to be determined, but Osili estimates that the sum can fetch up to $40 million.
STUDENT LOAN DEBT
“ More and more philanthropists are aware of this issue ”—Melissa A. Berman, CEO of Rockefeller Philanthropy Advisors
Student loans have become a major burden for a generation of millennials in the U.S., says Melissa A. Berman, President & CEO of Rockefeller Philanthropy Advisors, which advises on and manages more than $200 million in annual charitable giving. “More and more philanthropists are aware of this issue,” she says.
“A gift of this magnitude speaks to the power of philanthropy. It will allow these African-American graduates to start their life without economic and financial burden,” Osili says. “Meanwhile, this quite unprecedented, one-of-a-kind example will also have a significant social impact.”
Smith’s giving has an inherent message, which is his belief that a college degree can make a difference in the African-American community, Osili says. On the other hand, addressing the issue of student loan debt will lead to a bigger discussion about racial inequality, not just as a matter of getting access to colleges, but also a matter of debt and other challenges students of color face after completing schools.
Morehouse College, as well as Smith’s foundation, Fund II Foundation, didn’t immediately respond to requests for comments.
Smith is the richest African-American in the country with a net worth of $5 billion, according to Forbes.
In 2016, he committed $50 million to his alma mater, Cornell University, which named its chemical and biomolecular engineering school in his honor.
In 2017, he signed the Giving Pledge, an effort initiated by Warren Buffett and Bill and Melinda Gates to enlist the world’s wealthiest in giving away half of their fortunes.
Education is by far the most popular cause to which billionaires, especially American billionaires, give, according to Wealth-X’s Billionaire Census published earlier this month.
Four-fifths of the 2,604 billionaires worldwide direct at least part of their philanthropic activity to education. The U.S., in particular, has a long tradition of alumni giving back to their alma maters, according to Wealth-X, a global wealth intelligence and insight provider.
Many billionaires give generously, establishing scholarships, or funding a new university department or a building. Paying off student loan debt, as Smith did, is much more rare.
It’s not unheard of, though. A client of Rockefeller Philanthropy Advisors donated $10 million to Stanford University to pay off student debts for graduates who aspire to work in the public sector, according to Berman.
And there have been philanthropists who have offered to pay for college education, preventing students from having to take on high amounts of debt, she adds. For example, the late billionaire Sidney Frank and his family, also one of Rockefeller Philanthropy Advisors’ clients, donated $100 million to his alma mater Brown University, funding about 130 undergraduates’ education each year.
“Their generous donation allows some of the students to graduate debt-free,” Berman says.