US billionaire's gift to graduates fuels student debt debate

NEW YORK - When the American billionaire Robert Smith announced to students graduating from historically black Morehouse College that he would pay off their student loans, he put himself at the center of one of the 2020 US election's key issues.

While the cost of Smith's surprise gift announced on Saturday to Morehouse's 396-strong class of 2019 is not yet known, the body's student debt is thought to reach $40 million.

Smith, a Texas businessman who is the wealthiest African-American, has been applauded for his generosity, but his gift also generated jealousy among the many Americans struggling with huge student debts.

"Can a billionaire pledge to pay off my student loan debt? I'm glad for the graduating class, but also envious," one Twitter user wrote, reflecting a sentiment common on social media.

Already, several Democratic challengers to President Donald Trump in next year's elections have proposed ways to reduce the nearly $1.5 trillion American student loan burden, and even politicians who aren't running have weighed in.

"People shouldn't be in a situation where they depend on a stranger's enormous act of charity for this kind of liberation to begin with," tweeted Alexandria Ocasio-Cortez, a rising Democratic House representative who was elected last year in part on the promise of free university education.

MOBILIZED BILLIONAIRES

More than two-thirds of American graduates were in debt in 2016, the Institute for College Access and Success said in April, with their burden averaging $29,650.

Paying off the debt often weighs heavily on young Americans' lives through their 20s and 30s, delaying the starting of families and the purchase of cars and homes. 

All of that affects the US economy, and Smith isn't the first billionaire to take notice.

Last November, former New York mayor Michael Bloomberg pledged $1.8 billion to Johns Hopkins University in Baltimore, from which he graduated in 1964.

The donation aims to make education at the elite school more affordable to low- and middle-income students, who would otherwise have to face fees and living costs totaling about $72,000 per-year.

Another billionaire, Kenneth Langone, gave $100 million to the New York University School of Medicine last year to make tuition free for its current and future students.

TAX THE RICH 

Student loan debt levels soared in the US between 1996 and 2012, and Senator Bernie Sanders put the rising costs at the heart of his unsuccessful 2016 presidential campaign.

The following year, the independent politician from Vermont put a measure called the "College For All Act" before the Senate, which would have abolished tuition fees at public universities for most families.

The cost of the measure, which the Republicans leading the Senate have shown no interest in, has been estimated at $600 billion, to be financed by a tax on financial transactions.

Sanders is now among the 23 candidates for the 2020 Democratic presidential nomination, and together with Massachusetts Senator Elizabeth Warren has once again made student loan debt a plank of his campaign.

Warren last month unveiled a detailed proposal to abolish student fees in public universities and cancel student loan debt according to income.

The plan, estimated to cost $1.25 billion over a decade, would be financed by a tax on the very wealthy.

STATE MEASURES

Though few other detailed plans have emerged, almost all Democratic candidates in 2020 argue for making universities more affordable.

With the election still more than a year off, some states are taking their own steps to reduce the cost of higher education.

New York state started offering scholarships last year equaling public university fees to students of modest means, with the caveat that graduates remain in the state for a few years after finishing.

Washington state governor Jay Inslee -- another Democratic candidate in the 2020 race -- on Tuesday signed into a law a bill raising a key business tax and using the revenue to make attending a public university free starting next year for students from families below the median income level.

The bill was supported by two of the state's largest taxpayers: Microsoft and Amazon.

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Richest black man in US to pay off graduating class's student debt

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.

“We’re going to put a little fuel in your bus,” Smith said near the end of his address Sunday at the school’s 135th commencement service.

“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 senior class, all male and mostly African-American, erupted 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. “Everyone jumped up, cheered. People were crying. It was just the most amazing thing.”

“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.

Smith, known for a range of philanthropic donations including one to Morehouse earlier this year to finance scholarships, told the audience 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.

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 Smith will contribute. According to published figures, recent Morehouse classes have graduated with roughly $10 million in total debt.


2019 New York Times News Service

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