Without college debt, the sky’s the limit
Talk about generous — over the weekend, a billionaire investor caused a stir when he told the 2019 graduating class at Morehouse College that they would have no student loans hanging over their heads.
Robert Smith wanted the students to be free of debt.
“On behalf of the eight generations of my family who have been in this country, we’re going to put a little fuel in your bus,” the 56-year-old Smith, the founder of the investment firm Vista Equity Partners, told the students of the Atlanta-based school.
That fuel, Smith said, was in the form of paying whatever debt the entire class of 396 men had incurred to obtain a college degree. All of it.
That number is still being determined, but it was initially estimated at around $40 million. One student owed upwards of $200,000 for his college education. Tuition at the historically black college, Morehouse, runs around $25,400 for the latest academic year. Other costs such as books, fees, and room and board can push costs to around $48,000. With more than 90 percent of the class taking out some form of financial aid, it’s likely that nearly all members of the class carry some sort of debt to pay for their education. They are not alone.
It’s not unusual for students across the United States to graduate owing tens of thousands of dollars, a burden that limits choices and postpones big purchases, such as home ownership. The individual costs play out across society, with the Federal Reserve estimating that Americans owe $1.5 trillion in student loans — a debt that surpasses auto loans ($1.1 trillion) and credit card debt ($977 billion). The average outstanding loan balance in the United States is around $37,172. This crisis affects historically black colleges and universities disproportionately, since 75 percent of students at private institutions such as Morehouse take out federal loans, compared to 51 percent at non-HBCU private institutions.
As generous as Smith’s gesture is, it serves to underscore the failure of public policy in restraining costs of college as well as providing more assistance for students who cannot afford skyrocketing prices for a higher education. There is individual responsibility, too, with families who failed to save for their children’s college and young people who were unrealistic about what they could afford without taking on massive debt. Of course, added to all that is the reality that many families cannot afford to put money away for college.
The issue of college costs is emerging in the 2020 presidential race. Several candidates endorsed plans to make college tuition-free and Democratic candidate Sen. Elizabeth Warren proposed student debt forgiveness as well, to be paid for by a proposed wealth tax. The idea is to free up young adults — just as Robert Smith is doing at Morehouse — from debt so that they can make decisions without worrying about falling behind student loan payments. It’s clear Smith expects those students to pay this largess forward in the years to come — watching that play out will be enjoyable. We can’t wait to see what these students accomplish.
All the same, private philanthropy, as welcome and generous as it is, will not solve the real challenges of a generation too busy paying off loans to save money for a home, a new car or eventually, to put money aside for college for their own children. Smith’s generosity deserves praise, but now let’s rework public policy so that all graduates can leave college without the burden of thousands of dollars of debt.