Robert F. Smith—the billionaire who pledged during a commencement speech last year to pay off the student debt of the Morehouse College class of 2019—is launching a new initiative to help ease the burden of student loans at historically Black colleges and universities (HBCUs).
The Student Freedom Initiative, a nonprofit, is aimed at addressing the disproportionate loan burden on Black students and creating more choices for students whose career options or further educational opportunities might be limited by heavy student debt.
“You think about these students graduating and then plowing so much of their wealth opportunity into supporting this student debt, that’s a travesty in and of itself,” Smith, chairman and CEO of Vista Equity Partners, said Tuesday during a TIME100 Talks discussion with Editor-in-Chief Edward Felsenthal.
Smith—the wealthiest Black man in the United States, according to Forbes—donated $34 million last year that covered the student debt of about 400 Morehouse graduates, including the educational debt incurred by their families. He says his new initiative is an effort to create a more sustainable model for thousands more students.
“I think it’s important that we do these things at scale and en masse because that’s how you lift up entire communities,” he says. “Of course, we all like the great one story, but I want thousands of these stories. And I want thousands of Robert Smiths out there who are actually looking to do some things in fields that are exciting to them and are giving back.”
The Student Freedom Initiative will launch in Fall 2021 at up to 11 HBCUs, offering juniors and seniors who are science, technology, engineering and mathematics (STEM) majors a flexible, lower-risk alternative to high-interest private student loans. The list of HBCUs participating in the initial rollout has not been finalized.
The initiative, which aims to include 5,000 new students each year, is launching with a $50 million grant from Fund II Foundation, a charitable organization of which Smith is founding director and president, and has set a goal of raising at least $500 million by October to make the program “self-sustaining” through investments and graduates’ income-based repayments. The program’s partners include Michael Lomax, CEO of the United Negro College Fund; Henry Louis Gates Jr., director of the Hutchins Center for African and African-American Research at Harvard; the Jain Family Institute and the Education Finance Institute.
The student debt crisis has disproportionately affected Black students, who owe, on average, $7,400 more than their white peers after graduating with a bachelor’s degree, according to the Brookings Institution. That difference worsens over time, in part because of the racial wealth gap.
In addition, HBCUs generally have smaller endowments than other universities, hindering their ability to offer significant financial aid. And students who attend HBCUs borrow loans at higher rates and graduate with higher debt than students at non-HBCUs, according to a 2016 report by the United Negro College Fund.
But HBCUs remain an important professional pipeline. While African Americans are underrepresented in STEM fields, HBCUs, which represent 3% of colleges, are responsible for graduating 27% of Black students with STEM bachelor’s degrees, according to the U.S. Education Department.
Ultimately, Smith hopes to expand the Student Freedom Initiative to reach the more than 100 HBCUs in the U.S., as well as other minority-serving institutions.
“We can graduate all STEM students from HBCUs in essence forever under this program. It becomes self-sustaining,” Smith says. “They support the next generation of students, and it gives them flexibility to actually drive back some of what I call their intellectual property—what they’ve learned in college and business—back into the communities in ways that matter.”
The program is not intended to replace all student loans or erase existing debt from students’ freshman or sophomore years, but is meant to provide an alternative to high-interest, fixed-payment private loans and Parent PLUS loans, which are unsubsidized federal loans with higher interest rates and fees. HBCU students are more likely than non-HBCU students to take out federal student loans and then turn to Parent PLUS loans and private loans for additional funding, according to the United Negro College Fund report.
The Student Freedom Initiative aims to prevent that and expects to offer about $32,000, on average, to each student across their junior and senior years, which they will be required to pay back based on their income after graduation.
“It is a specific, actionable platform. It’s not going to solve all the world’s problems,” says Fred Goldberg, former Internal Revenue Service commissioner and an attorney at Skadden, Arps, Slate, Meagher & Flom who is outside counsel for the Student Freedom Initiative. “It’s an opportunity to do something now that matters now, with the potential to transform both these institutions and generations of young African American men and women.”
Goldberg says the initiative will provide a better option to students who might consider dropping out when faced with taking on more high-interest debt to complete their degree. And he’s hoping it will give students of color more freedom to choose a career without worrying about their salary or to take time off to care for a family member without worrying about making loan payments.
“It lets folks make life choices,” he says. “If a kid wants to switch careers, if a kid wants to go from a high-paid job in industry to an entrepreneurial tech startup, or if he wants to go teach science in an inner-city school, income-contingent payments are what let the student do that because they’re not saddled with fixed-payment, high-cost loans.”
Goldberg says the Student Freedom Initiative will offer students a lower interest rate than the Parent PLUS rate, which is currently 7.08%, and will require students to make payments based on their income for up to 20 years after graduation.
“Your legal obligation is to pay a portion of your income. If you have no income, your legal obligation is to pay zero,” he says.
“A piece of this, of course, is pay it back. Any student who does this by making these payments that are income-contingent, which liberates them, is helping future generations,” he added. “Nobody’s tried this before, certainly not at scale.”
Smith’s announcement comes amid a reckoning over systemic racism in the United States. In the wake of widespread protests sparked by the death of George Floyd, companies and business leaders have faced demands to take more meaningful action.
“We have systemic issues that are caused by systemic racism that need to be deconstructed,” Smith says, calling on corporate executives to do more than offer “perfunctory” donations “that are a mere drop in the bucket.”
“It is incumbent upon me to do my part to educate, awaken and enable all those who want to participate … in this moment of inflection,” he says.
This article is part of #TIME100Talks: Finding Hope, a special series featuring leaders across different fields encouraging action toward a better world. Want more? Sign up for access to more virtual events, including live conversations with influential newsmakers.
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Write to Katie Reilly at Katie.Reilly@time.com