Financial institutions commonly refer to student debt as “good debt” since it is used to pay for a higher education, which can lead to better career and salary opportunities. However, that idea disregards the long-standing financial and economic inequities that Black students and other students of color face.
While a college education is meant to help close the racial wealth gap, the current system continues to perpetuate the racial wealth gap cycle.
How Student Debt Continues the Racial Wealth Gap Cycle
To afford a college education, many Black Americans have to rely more heavily on student loans than their white counterparts since their families are at a disadvantage due to generational wealth disparities. In addition to this, Black Americans typically make less after they graduate compared to white Americans, which adds to the racial wealth gap cycle.
According to the Brookings Institution, Black college graduates owe an average of $7,400 more than white students once they graduate. Four years post-graduation this gap widens even further, with Black college graduates owing an average of $52,726, compared to the $28,006 that white college graduates owe.
What Can Help Racial Disparities in Student Loan Debt?
Recently, the Biden Administration announced a three-part plan to cancel some student debt for low- to middle-income borrowers. Although President Biden’s student debt relief plan may have a positive impact on the racial wealth gap, it is just a small solution for a difficult issue.
Since the racial wealth gap has built up over the course of several generations, it will likely take multiple generations to be completely eliminated. In order to accomplish this feat, we will need consistent effort by advocates, government initiatives and other organizations.
Student Freedom Initiative
One organization that has been steadfastly dedicated to relieving the crushing weight of student loan debt for underserved communities is Student Freedom Initiative. This 501(c)3 nonprofit offers an income-contingent funding option to rising junior and senior STEM majors at affiliated Historically Black Colleges and Universities (HBCUs) and other Minority Serving Institutions (MSIs).
This financing alternative is not designed to replace other forms of funding such as a work-study program, traditional loans, scholarships or grants. Instead, it is meant to help students pay for their remaining educational costs after other financial aid options have been exhausted.
After a student graduates, they make monthly repayments to the Initiative, where the funds are reused to help future students. In addition to funding, the Initiative provides access to resources such as tutoring, mentoring and internship opportunities facilitated by internXL.
The Initiative launched its first cohort in the fall of 2021 with nine Historically Black Colleges and Universities (HBCUs). The next year, the program launched its second cohort with eleven more schools. In 2023, the Initiative will expand to include fourteen additional schools, which will include Hispanic-Serving Institutions (HSIs) and Asian American and Native American Pacific Islander Serving Institutions (AANAPISIs). By expanding to thirty-four schools, the Initiative can possibly help over 15,986 new students.
How Did Student Freedom Initiative Get Started?
The impetus for the Initiative was Founder, Chairman and CEO of Vista Equity Partners (Vista) Robert F. Smith’s gift to cover the student loan debt of the 2019 Morehouse College graduating class. In 2021, Smith helped to kick off the Initiative with a personal gift of $50 million, to match the $50 million contribution from the Fund II Foundation, of which Smith is the founding director and President. Due to his contributions, Smith was named the Chairman of Student Freedom Initiative and is listed as one of the organization’s anchor donors.
In regard to the announcement of the Initiative’s newest cohort, Smith said “we are excited by the 149% increase in students who will benefit from Student Freedom Initiative’s programs. This is remarkable growth since we first started this journey with nine participating HBCUs.”
Robert F. Smith’s Philanthropy
Smith is a philanthropist, entrepreneur and industry leader that’s passionate about education and creating academic and professional opportunities for underserved communities. His commitment to helping others stems from the values that his parents, two hardworking teachers, instilled in him at an early age.
In the last few decades, Smith’s philanthropic efforts include helping education institutions and social justice organizations in addition to the arts, plus scientific research for breast cancer and prostate cancer. In 2017, Smith became the first African American to sign the Giving Pledge, which is a promise to give away a large portion of his wealth. Two years later, Smith was honored with the Carnegie Medal of Philanthropy.
Most recently, Smith has made personal gifts to his alma maters. In 2022, he donated $10 million to the Robert F. Smith ’94 Scholarship Fund at Columbia University. Later in the year, Smith gifted $15 million to Cornell University’s College of Engineering to establish three funds.