During Robert F. Smith’s commencement speech to the Morehouse College Class of 2019, he announced that he would be paying off each of the almost 400 graduates’ student loan debt.
The gift, which amounted to $34 million was intended to liberate the graduates from their debt and allow them to begin generating wealth — and it has.
2019 Morehouse graduate, Aaron Mitchom, is highlighted in a 2022 story by the Boston Globe, where he discusses the impact that Smith’s gift has had on his young but already promising career.
“I’m working on increasing my family’s net worth. I want my family to be able to see what I see. I want them to be able to enjoy what I enjoy,” Mitchom, who works as an investment banker, said to the Globe. “My mom now has a portfolio.”
The opportunity to build generational wealth for his family would not have been possible following Mitchom’s graduation without Smith’s intervention. He had accumulated over $200,000 in debt during his years at Morehouse.
Yet the position Mitchom would’ve been in without the gift is not unique – it’s one that so many African American graduates across the nation are currently facing.
Disproportionate Effects of Student Loan Debt on African Americans
While student loan debt is an issue frequently affecting the finances of Americans, the effect it has on African American graduates is remarkable.
According to the Education Data Initiative, Black graduates owe $25,000 more than White graduates on average. Over 45% of Black graduates owe $40,000 or more in student loans, and of that group 17% actually owe more than $60,000.
That amount of debt is crushing for Black students’ ability to build a foundation of wealth. More than 50% of Black graduates report that their net worth is lower than the total amount of their student debt, while 42% pay more than $250 a month towards student loans.
Not only do student loans limit the ability to create wealth, they also can create an element of fear when it comes to taking a potentially beneficial risk on the career front.
“If borrowers have high debt loads and they have a job, it’s hard to know if they can take leave or risk leaving that job,” said public policy professor Fenaba R. Addo to the Boston Globe. “That is the opposite of what we are talking about when we talk about wealth.”
Perhaps the most eye-opening statistic comes when examining the positions of Black graduates on income-driven repayment plans. These plans, as stated by the federal government, are designed to lower monthly payments to an, “amount that is intended to be affordable based on your income and family size.”
The reality, however, is that 71% of Black graduates on an income-driven repayment plan do not have a savings account.
Robert F. Smith: Combatting Black Student Loan Debt
Robert F. Smith is taking action, working with multiple organizations and envisioning alternate avenues to tackle the student debt crisis.
Student Freedom Initiative, of which Smith is the Chairman, partners with HBCUs across the country to support the infrastructure and offer STEM students at HBCUs an income-based funding alternative. Through Student Freedom Agreement, students can receive up to $20,000 a year in funding during their Junior and Senior years — money that is repaid based on their post graduation income and forgiven after 20 years. Any money repaid towards the funding a student received is recycled back into the program, paying it forward to the next generation of students.
Through the initiative, Smith has created a program that not only chips away at the problem of student debt, but also aids Black students to give them the ability to achieve career goals while simultaneously creating generational wealth.