Days after a billionaire pledged to pay the collective student debt of the entire 2019 Morehouse College graduating class, euphoria was not the only emotion in the air.
On Morehouse’s Atlanta campus and beyond, administrators, students and parents — and no shortage of tax and philanthropy experts — have spent the last few days wondering how, exactly, Robert F. Smith, a titan tech investor, would fulfill his promise to 396 graduates. The surprise announcement was both an extraordinary gift — and a complicated one.
At the end of a graduation celebration on Sunday night, Shaquille Lampley returned to his dorm room on campus, opened the computer and stared at his student loan estimates. They totaled more than $200,000 in loans taken out by his mother, covering six years in school. “I just kept looking at the number and thinking to myself, this would cripple me for life,” said Mr. Lampley, 24, who earned a degree in sociology. “I am so grateful and still in shock about this gift, and now I have so many questions about how this will be processed.”
Among the questions: Are all student loans included? Does the pledge include loans taken out by the graduates’ parents? What about gifts from home equity loans?
Expected to run well into the millions of dollars, the pledge will not benefit those who never made it to graduation because their crushing debts forced them to withdraw before they earned a degree.
“I felt a level of survivor’s guilt,” said Myles Washington, 21, one of the graduates expecting to receive tens of thousands of debt relief from Mr. Smith. “There were students that were here that were just as smart and just as talented as us that didn’t have the opportunity because they had to leave early.”
“I am so grateful and still in shock about this gift, but now I have so many questions about how this will be processed,” said Shaquille Lampley, who earned a degree in sociology.CreditDustin Chambers for The New York Times
The college president, David A. Thomas, who had no idea of Mr. Smith’s plans to make the pledge, said the college would work out the logistics of the grant soon.
“We know that Mr. Smith is going to erase the debt of the 396 students who received diplomas,” he said. “What we have not determined yet is the form or mechanism and the details on how this will happen. We will be meeting in the coming days.”
The generosity of Mr. Smith — the richest black man in America — highlighted the systematic problems of debt in American college education.
Over all, the majority of seniors at four-year colleges — about two-thirds — are carrying student loan debt. In 2017, that average was nearly $29,000, according to an analysis of federal data from the Institute for College Access and Success, a nonprofit advocating affordable higher education. Adjusted for inflation, that same average was about $13,000 in 1996.
“This generation of students is the most debt burdened ever, and it’s a huge problem for them,” said Mehrsa Baradaran, a law professor at the University of Georgia and author of “The Color of Money: Black Banks and the Racial Wealth Gap.”
“I do think you’re going to have a generation of students whose main concern, instead of finding a partner they love and coming up with a career, they have this huge part of their psychological and emotional toll being about the servicing of these debts,” she added.
During his commencement speech at Morehouse College, the billionaire investor Robert F. Smith pledged that he and his family would pay off the student debt for the entire graduating class.CreditCreditAudra Melton for The New York Times
The picture for recent African-American graduates of four-year colleges is worse: These students owe, on average, $7,400 more than their white peers, according to research from the Brookings Institution that examines all graduates, including those who did not borrow. And over the next few years after graduation, that debt gap, including new graduate school loans, widens to about $25,000.
Students attending historically black colleges like Morehouse are also more likely to take out loans compared with other students, in part because of the racial wealth gap.
“This is due to the compounding effect of a history of housing segregation that’s created a racial wealth gap,” Professor Baradaran said. “If you have lower wealth, you’re going to have to borrow more. And if you have to borrow more, you’re going to get charged with higher interest.”
The type of debt students and families carry beyond traditional educational loans varies widely.
One study that private lender Sallie Mae and market research firm Ipsos publishes, “How America Pays for College,” measures the range of loans that family members take out to pay the education bills. The federal parent PLUS loans represent 7 percent of total costs, on average, for families that borrow. Private loans, like the ones that Sallie Mae offers, represent 4 percent of the total. Credit cards, retirement plan loans and home equity debt make up 1 percent each.
For Mr. Washington, who earned a degree in psychology, the gift of his newly acquired financial freedom, he believes, will affect three generations. “Not only does it affect me or affect my parents, it also affects my kids,” Mr. Washington said. “If I’m still in my 30s and my 40s still having to pay off student loans, the opportunities are limited for them as well.”
But the gift also reminded him of so many other students who were not at Sunday’s commencement exercises: the men whose finances forced them to leave Morehouse before graduation.
Sixty-eight percent of undergraduates at Morehouse borrow at least some money. The students who get degrees end up with a relatively manageable $26,000 of federal student loan debt, or $276 in monthly payments on a standard repayment plan, according to federal data. These figures do not include private loans, PLUS loans or other debt.
But only 53 percent of full-time, first-time students finish their undergraduate studies at Morehouse within six years. People who leave before graduation tend to struggle financially, according to federal Bureau of Labor Statistics data that measures the entire population. They get little economic benefit from completing some college, earning just 8 percent more than high school graduates. Yet they are still saddled with whatever debt they took on to get as far as they did with their studies.
Jordan Long, 22, was one of those students — and would have been a recipient of Mr. Smith’s pledge had he stayed at Morehouse. He arrived on the campus from Oakland, Calif., in the summer of 2015. “I loved the idea that I was walking on the same campus as Martin Luther King Jr.,” he said.
Mr. Long paid for the first two years through a combination of help from relatives and federal student loans, accumulating more than $60,000 in debt. But by the end of his sophomore year, he had packed his bags for good. “I didn’t have enough scholarship money and I didn’t want to have to put that kind of a burden on my family,” he said.
Mr. Long, who is now a community college student, learned about Mr. Smith’s gift on social media. Then he took to Twitter: “I left Morehouse class of 2019 to avoid debt and this billionaire just paid the graduating class’s debt off. Kill me.”
In a subsequent interview, he added: “I am so happy for all my friends who graduated and I texted them, but sad for myself. Somebody told me to do a GoFundMe to see if I could get help with the loans. I figured, my luck couldn’t be any worse.”
Morehouse’s Office of Business and Finance and the Office of Enrollment Management are now working to calculate the student loan debt and other details of the gift.
“As soon as we have a final figure,” the college said in a statement, “we will share it.”