By now you have probably heard about the entire 2019 graduating class at Morehouse College having its student loan debt being paid off by billionaire Robert F. Smith.
That’s right! Robert Smith promised to pay off the student loan debt for the entire 2019 graduating class.
You can watch the video here and see the looks on the student’s face as they realize that their student loan debt has just be wiped out.
Who is Morehouse College?
Morehouse College is a very proud, all-male HBCU (historically black college or university) located in Atlanta, Georgia.
Founded in 1867, Morehouse has a history of producing outstanding leaders and famous alumni; notably former Atlanta Mayor Maynard Jackson, Director Shelton “Spike” Lee, actor Samuel L. Jackson. These are just a few of the more well-known graduates.
Name any profession or industry and you can find a Morehouse Man somewhere within the upper ranks of management.
I can honestly say that some of my best years in life were spent as a student at Morehouse College.
Who is Robert Smith?
You are probably wondering who this billionaire philanthropist is.
Well, according to his Wikipedia page, Robert Smith is a billionaire and is currently ranked by Forbes as the 163rd richest person in America. As an African American man, he is even richer than Oprah Winfrey.
Let’s just say that Robert F. Smith is doing very well. But he did not come from money – meaning he was not always wealthy. He grew up in a middle-class neighborhood in Colorado.
He does come from an educated family. His father and mother both hold PhDs.
Robert Smith is also quite educated too, holding an undergraduate degree and a masters degree from not one, but two Ivy League schools – Cornel and Colombia. After obtaining his MBA from Colombia, he went on to have a successful career at Goldman Sachs in technology investment banking.
Despite his father and mother holding PhDs and he himself obtaining a master’s degree, working for an employer was not the ultimate source for how he became a billionaire.
He became a billionaire by becoming an entrepreneur. In 2000, he founded Vista Equity Partners – a private equity and venture capital firm.
Instead of settling on being an employee at illustrious investment banks like Goldman Sachs (seriously, this was not bad at all), Smith became his own boss and a job creator. Vista owns over 50 software companies and has over 60,000 employees worldwide.
Student Loan Debt Has Crushed African Americans
About 400 Morehouse graduates will have consolidated student loan debt totaling approximately $40 million paid off.
While the reality of this gift is truly amazing, it’s troubling to know that education in America has become so expensive. When you do the math, $40 million for a class of 400 equates to $100,000 of debt per person.
This is $100,000 of debt on their shoulders before they even start working – before they buy a home or start a family.
Student loan debt is a big problem in America.
According to Federal Reserve Data, student loan debt has reached a staggering $1.5 trillion and now exceeds all consumer related debt!
Student loan debt is behind mortgage debt but is higher than credit card debt and auto loans.
Moreover, student loan debt is largely responsible for killing the American dream and declining homeownership.
Not only has the total outstanding amount of student loans increased, but the student loan default rate has gone up with it.
However, while people from all races are adversely affected by the rising cost to obtain a college or university degree, African-Americans are suffering disproportionally.
Student loan debt has become a crisis
For African-Americans, the student loan default rate has reached the level of a crisis.
As I said in a previous post, the delinquency figures for black student loan borrowers is very troubling.
Almost 50% of African American student loans are in default!
Twenty-three (23%) percent of blacks that actually obtain their university degree still end up in default.
The increase in lifetime income and wages that generally come with obtaining a college degree was thought to be one of the strongest mechanisms for closing the gap.
After studying the default rate data, this assumption may have to be revisited. For African Americans, a college degree does not guaranty a job that pays a high salary.
This clearly shows why the wealth gap between blacks and whites in America has become so pronounced.
Quite sadly, this generation of African Americans will probably give over a trillion dollars of black wealth to colleges and universities chasing an American dream that many believe does not exist.
What should Morehouse graduates do now that they don’t have student loan debt?
Every single Morehouse Man that was fortunate to have his student loan debt paid off this year should start a business.
The money that would have originally been used for student loan payments should be invested in running a business.
I’m not saying that each and every graduate should become an entrepreneur, maybe they can partner with an entrepreneur. They can provide the capital and their partner can run the business.
The graduates can still go out and find a job, but they could use the money obtained from the job as capital to support the business. This would enable the entrepreneur partner to solely focus on running the business instead of having to worry about money.
When Robert F. Smith talked about paying it forward, to me, this means going out and starting a business that will create jobs for all the other millions of people that are struggling and economic lack opportunity.
To whom much is given, much more is expected.
Morehouse class of 2019, now that you don’t have student loan debt, you can now run 10x faster than everyone else. We expect you to run ahead of the pack and become a leader, advancing the economic well being of others that get left behind by the inequality of life.
Start your own business. Become an entrepreneur.