Investor Robert F. Smith, who’s ranked by Forbes as the 163rd richest person in the US with a net worth of $5 billion, shocked graduating Morehouse College students by announcing he’s 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, Georgia. The gift could total $40 million, a Morehouse spokesperson told 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.”
Read more: Here’s why Home Depot’s billionaire co-founder is helping pay tuition for every NYU med school student
Smith isn’t the only billionaire paying student loans. Home Depot co-founder Ken Langone announced last year he would pay tuition for every NYU medical student, a gift that totaled $100 million of his own 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 shows 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 graduates of historically black colleges have 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, billionaire and executive vice chairman of the Blackstone group, recently set up the Education Finance Institute to explore alternatives to paying for colleges outside of loans. Silicon Valley investors — including actor Ashton Kutcher and 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.”
Solutions to student debt will likely be at the forefront of the 2020 presidential race. Democratic nominee Elizabeth Warren 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, author and outspoken billionaire critic, 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.”