- The private-equity tycoon Robert F. Smith vowed Sunday to donate money to pay off student-loan debt for Morehouse College’s graduating class of 2019.
- While the rich have given universities generous gifts for decades, billionaires are addressing the ballooning student-debt crisis directly by paying the tuition of incoming students or writing checks for recent grads.
- The Home Depot cofounder Ken Langone recently donated $US100 million to help make New York University’s medical school tuition-free.
- Visit Business Insider’s homepage for more stories.
The investor Robert F. Smith, who’s ranked by Forbes as the 163rd-richest person in the US, with a net worth of $US5 billion, shocked graduating Morehouse College students over the weekend by announcing that he was paying off their student loans – an issue other billionaires have begun tackling.
During his commencement address on Sunday, Smith said he would pay off debt for the 400-person graduating class of the historically black, all-male college in Atlanta. The gift could total $US40 million, a Morehouse representative told the local news outlet 11Alive News.
“My family is going to create a grant to eliminate your student loans,” Smith told the graduating seniors. “You great Morehouse men are bound only by the limits of your own conviction and creativity.”
Smith isn’t the only billionaire paying student loans. The Home Depot cofounder Ken Langone announced last year that he would pay tuition for every New York University medical student, a gift that totaled $US100 million of his money. The school endowment now offers free tuition for every student regardless of need.
The donations come at a time when American millennials are in record amounts of debt. Some economists have predicted that 40% of borrowers might default on their student loans by 2023, which could have economic effects similar to those of the subprime-mortgage crisis.
Research has found that the student-debt crisis hits black families harder than white ones. Black graduates default on their loans at five times the rate of white grads, according to the Brookings Institution. A recent report in The Wall Street Journal found that graduates of historically black colleges had 32% more debt than students from other schools.
While the rich have donated money to universities for decades, they began using their money to address student loans recently.Tony James, the billionaire executive vice chairman of the private-equity firm Blackstone, recently set up the Education Finance Institute to explore alternatives to paying for colleges outside loans. Silicon Valley investors – including the actor Ashton Kutcher and the Bedrock founder Geoff Lewis– are also looking at ways to tackle the student-debt crisis.
“I think it is a crisis,” James told Yahoo Finance. “The impact on lives is huge – students come out burdened with that.”
Michael Bloomberg, the US’s ninth-richest man, according to Forbes, recently donated a record $US1.8 billion to his alma mater, Johns Hopkins. Though the money did not go toward eliminating student debt, he spoke about the importance of helping low-income students gain access to quality education.
Solutions to student debt are likely to be at the forefront of the 2020 presidential race. Sen. Elizabeth Warren, a 2020 Democratic presidential candidate, offered a plan to eliminate student debt for 42 million Americans, funded by taxing billionaires like Langone and Smith.
“This is generous, no doubt,” Anand Giridharadas, an author who has been an outspoken critic of billionaires, told The New York Times regarding Smith’s donation. “But a gift like this can make people believe that billionaires are taking care of our problems, and distract us from the ways in which others in finance are working to cause problems like student debt, or the subprime crisis, on an epically greater scale than this gift.”
Business Insider Emails & Alerts
Site highlights each day to your inbox.