Billionaire Robert F. Smith’s pledge to pay off the education loans of the 2019 graduates of Morehouse College in Atlanta gave Nashawn Chery a clean financial slate.
Every dollar that would have gone to paying down his $10,000 debt can now be saved or invested, used to build the sort of wealth that is too often elusive for African Americans.
Now Smith is expanding the parameters of his gift. On Friday, Morehouse announced that in addition to paying the loans incurred by those graduates, he will cover the educational loans taken out by their parents. His gift to the class now adds up to $34 million.
“It says a lot about how Robert came to understand the issues of affordability and student debt,” David A. Thomas, president of Morehouse College, said of Smith’s inclusion of parental loans. “Our parents take out loans, often to the tune of $50,000 or more. And potential default on those loans affects the ability to finance other family needs. We know there is a wealth gap for African American families, so this [gift] is very significant.”
In the four months since Smith announced his gift during a commencement speech at Morehouse, the graduating class has embarked on a new stage of their lives without the inhibitions of student debt. The fresh start has made it easier for some to take jobs that are more rewarding emotionally than financially, or consider ventures that were once too risky.
Jason Allen Grant, 22, said his parents borrowed more than $45,000 for his education. His father, a 57-year-old banking examiner at the Federal Reserve Bank of Cleveland, was planning to work an additional decade to pay off his son’s college expenses.
“It was going to be a long haul for us to pay off those loans,” Grant said. Now with Smith’s latest gift, Grant plans to open his own retirement account with the money he would have used to help his parents.
“I can now plan ahead and save,” he said.
Smith’s philanthropy arrives amid a national conversation around student debt cancellation, an idea that has emerged from the wish lists of student activists and made it to the platforms of Democratic presidential candidates.
Presidential hopefuls and liberal lawmakers are proposing debt cancellation as a way to reinvest in students and spur economic development. Some plans are based on household income, while others call for universal loan forgiveness funded by taxing Wall Street firms.
The idea has been panned as regressive for disproportionately benefiting wealthy households that tend to hold the most debt from graduate studies. Its supporters argue that debt cancellation would in fact benefit those with little to no wealth, particularly African Americans, who are more likely than other racial groups to hold student loans.
Black families on average have minimal financial resources to afford college — disadvantaged by generational wealth disparities — and as a result rely heavily on loans to finance higher education. Economists say that debt exacerbates existing racial wealth inequality.
“Cancellation of student debt is an economically just policy,” said Darrick Hamilton, a scholar on race and economics at Ohio State University. “Education, in and of itself, is something we should be investing in and should not be based on one’s ability to pay.”
Borrowing to attend Morehouse seemed inevitable when Gian Ray, 24, received his acceptance letter from the private school in 2014. Tuition alone was more than $40,000 a year at the time.
But after attending a predominantly white Catholic high school in Philadelphia, Ray said the last thing he wanted was to be one of the only black students in a classroom again. His parents helped out as much as they could, and he received scholarships. That allowed Ray to graduate from Morehouse in 2018 with about $20,000 in student loans.
Paying that money off means making some sacrifices — giving up his one-bedroom apartment to move in with a roommate and sticking to a budget. Ray said things would certainly be different if he did not have any loans.
“I could travel, save a couple hundred dollars, maybe invest in a house — the things people want to do when they graduate college,” said Ray, who works in North Carolina as a consulting analyst. “Student loans have become a part of life. You just got to hope that the investment in Morehouse pays off and down the line it’s worth it. So far, it is.”
There was no question in Chery’s mind as to whether an education from Morehouse would be worth the expense. After visiting the campus as a high school senior, he was struck by the sense of community and by meeting freshmen who were interning at Google.
Chery said his mother worried about how they were going to afford the college. Her salary alone supported him, his two brothers and his grandmother, and the money could stretch but so far. A combination of scholarships, a part-time job, an installment payment plan and loans made Morehouse possible.
Now, an unexpected gift from a stranger could make financial freedom possible.
“Growing up in a single-parent household, money was always an issue. My mother had two jobs. I’d barely ever see her, because she was working so hard to provide for our family,” said Chery, who works in San Francisco as a software engineer. “Economic freedom means being able to be there for my kids, not having the constant stress and worry of not having money.”
About 80 percent of students at historically black colleges use federal loans to fund their education, compared with 55 percent of their peers at other private and public schools, according to the United Negro College Fund. Historically black schools have smaller endowments and admit more students with financial need than comparable universities. As a result, 1 in 4 students at historically black institutions borrow $40,000 or more to attend college.
At Morehouse, graduates on average leave with $35,000 to $40,000 in student debt. Concerned that education loans could hinder men at the all-male college from pursuing their dreams, the institution began a fundraising campaign this summer to provide debt relief. The initiative was an outgrowth of Smith’s gift. Thomas, the Morehouse president, said the college is in talks with other potential benefactors who, if all goes well, may provide donations totaling eight figures.
“Smith’s gift has inspired others to go into conversations with us about how they can help with the challenges of affordability,” Thomas said. “It’s brought attention to Morehouse and other historically black colleges as opportunities for individuals to support philanthropically at levels equivalent to what we see at peer predominantly white institutions, where a multimillion-dollar gift is not newsmaking, because it happens routinely.”
The bursar’s office at Morehouse has been busy ironing out the logistics since receiving Smith’s unprecedented gift. The school has conferred with the Education Department to ensure student loan servicers, the middlemen who collect and apply debt payments, receive the money each family owes before the first payment comes due. All payments are being disbursed through the college initiative. The school is encouraging graduates and their parents to consult an accountant about potential tax liabilities.
Bringing the sort of debt relief Smith has offered to a national stage would be a tremendous undertaking.
Large-scale student debt cancellation faces considerable political opposition. It would require complementary policies that tackle labor market discrimination and other structural barriers to wealth creation to have a meaningful impact for African Americans, said Ohio State’s Hamilton.
Still, the proposals have sharpened the focus on using public policy to address disparities that experts point out were created by public policy.