May (2019)– The 396 young men began the day as students in caps and gowns, ready to graduate from Morehouse College — full of hope, but burdened in most cases with the debts that financed their education.
Then their commencement speaker went off-script with an extraordinary pledge: the newly minted alumni of the historically black college in Atlanta would go forth into the world student debt-free.
Robert F. Smith, the billionaire investor who founded Vista Equity Partners and became the richest black man in America, told the crowd that he and his family would pay off the entire graduating class’s student debt, freeing them to begin their next chapter, whether it was a master’s program, a position with Teach for America or an internship at Goldman Sachs, without loan payments to worry about.
The announcement came at a time of growing calls across the country to do something about the mounting burden of student loan debt, which has more than doubled in the past decade. Presidential candidates like Elizabeth Warren have made debt cancellation a key plank in their campaign platforms, and some states and institutions are moving to make college tuition-free.
“This is my class, 2019,” he said, personally claiming the graduating seniors as his own. “And my family is making a grant to eliminate their student loans.”
It seemed to take a moment for the immensity of what he had promised to sink in. Then the place erupted, as the senior class, all male and mostly African-American, shook hands and hugged one another in glee.
“We’re all in robes, hot, the sun was beaming on us,” said Ernest Holmes, who said he had about $10,000 in loans that his parents were going to tackle. “We’re holding our papers up, trying to block the sun out of our eyes. Everyone jumped up, cheered. People were crying. It was just the most amazing thing.” Mr. Holmes said he would soon start work as a software engineer for Google in Mountain View, Calif.
“A blessing, a blessing!” were the words Brandon Manor offered as he imagined for the first time what life would be like without student loans to repay. It meant he could consider applying to a wider range of medical schools, because cost would no longer be his main concern. “Now all of a sudden, I can look at schools I might not have considered, because I am not applying with about $100,000 in undergraduate loans.”
Mr. Smith, known for a range of philanthropic donations including one to Morehouse earlier this year to finance scholarships, told the audience on Sunday that his gift was meant to set an example of paying forward.
“Let’s make sure every class has the same opportunity going forward, because we are enough to take care of our own community,” he said. “We are enough to ensure we have all of the opportunities of the American dream, and we will show it to each other through our actions and through our words and through our deeds.”
According to a person familiar with his thinking, Mr. Smith had become increasingly concerned in recent years about the degree to which students leave college saddled with heavy debts, including many at Morehouse, something that gnawed at Mr. Smith as he prepared to accept an honorary degree from the college. The idea of wiping out the current class’s debts came to him in recent days, the person said, and as he prepared for the graduation on Saturday, Mr. Smith grew more convinced that he would make the gesture. But he kept his plans quiet.
He did not inform Morehouse’s administration, employees or students in advance, and many in Mr. Smith’s own inner circle were surprised by the news.
Many details remain unsettled, including how students will demonstrate the amount of debt they have and how it will be paid off. Also unclear is the total amount Mr. Smith will contribute. Morehouse employees were scrambling on Sunday to calculate the total student loan debt of the 2019 graduating class. According to published figures, recent classes have graduated with roughly $10 million in total debt, but the figure could be considerably higher this year.
Full-time tuition at Morehouse was $25,368 in the latest academic year, and other expenses, including room and board, books and fees, can push the total cost of attendance above $48,000. More than 90 percent of students receive some form of financial aid, according to the college.
The college president, David A. Thomas, said he would meet with Mr. Smith to work out the details of the grant.
“This was a liberation gift, meaning this frees these young men from having to make their career decisions based on their debt,” Mr. Thomas said. “This allows them to pursue what they are passionate about.”
News of Mr. Smith’s gift stunned the higher education world on Sunday. John Silvanus Wilson Jr., a Morehouse alumnus who was the college’s president from 2013 to 2017, called it “an extraordinary investment” that was “simply an act of high grace.”
“Mr. Smith is a wise investor, and based on how he made the announcement, challenging them to ‘pay it forward,’ it sounded to me as if he wants the return on this particular investment to be tabulated by the giving and good these young men show others throughout their lives,” said Dr. Wilson, who was the executive director of the White House Initiative on Historically Black Colleges and Universities for part of the Obama administration.
“And, ideally, perhaps a central element of that return will become apparent when this Class of 2019, along with scores of other Morehouse alumni, make their own financial investments in Morehouse like never before.”
The federal government has some programs for loan forgiveness, but they are tailored for particular categories of students — those who take jobs in public service, for example, or those who were misled by for-profit institutions — or they take effect only after many years of faithful repayment. Some of the forgiveness programs have stalled or have raised doubts about whether the government will make good on them.
Some institutions have responded to the student debt crisis by reducing or eliminating tuition. The New York University School of Medicine recently announced that it would be free for all students, citing the “overwhelming financial debt” facing graduates. That was made possible in part by a large gift from Kenneth Langone, the founder of Home Depot, and his wife, Elaine, for whom the medical school is named.
Loan cancellation generally has not come straight from the pockets of billionaires, however, despite the many calls in recent years for them to provide it. Ms. Warren’s plan, for instance, would tax ultra-wealthy citizens like Mr. Smith to relieve much of the nation’s $1.5 trillion in student loan debt.
For the Morehouse graduates, debt relief will be immediate, sparing them what could be a decade or more of monthly payments that can be particularly hard to shoulder in the unsettled years just after graduation. The standard repayment plan for federal student loans is up to 10 years, but research indicates that most students take far longer than that to pay off their balances. The average debt for students with federal loans is $32,000, according to government data.
Forbes estimates Mr. Smith’s fortune at about $5 billion, built mainly through Vista Equity Partners, a private equity firm that focuses on buying and selling software firms. The firm has about $46 billion in assets under management, according to Forbes. It is privately held and does not publicly report its results, but it is believed to be one of the best-performing firms in the country, with annualized returns of more than 20 percent since its founding.
Mr. Smith, who was among the largest donors to the Smithsonian Institution’s National Museum of African-American History and Culture, has long been an active philanthropist. The Morehouse grant is his latest effort in Atlanta to support causes directly related to African-American history, culture and education.
Earlier this year, Mr. Smith’s foundation purchased the house where the Rev. Dr. Martin Luther King Jr., was born, along with the house where Dr. King lived with his wife and children, and donated both properties to the National Park Service. Dr. King was a Morehouse graduate.
His interest in higher education stems from his childhood, when his mother would send $25 checks each month to the United Negro College Fund — an organization to which Mr. Smith would ultimately direct tens of millions of dollars. As his wealth grew, he has said, he became more alarmed by the lack of diversity in science, engineering and technology.
In 2016, Cornell University, where Mr. Smith earned a bachelor’s degree, named its chemical and biomolecular engineering school for him after he and his foundation made a $50 million gift. Part of the donation, Cornell said, was intended to assist black and female students.
John Cooper, a 2019 graduate who majored in political science at Morehouse, had planned to start chipping away at his $98,000 in student loans with a payment plan. He accepted a paid fellowship with Lead for America, working in Mississippi or Tennessee, and plans to apply to law school after that.
Now he can consider more schools, he said — and Mr. Smith’s gift did something else as well.
“Not only does this donation help create generational wealth, but it inspires people to give back,” Mr. Cooper said. “The fact that I know somebody who paid off $98,000 of my student loans makes me just want to go out and just give to people even more than I did before.”