(Bloomberg) -- Billionaire Robert F. Smith’s surprise pledge to pay off the student loans of Morehouse College’s class of 2019 will cost $34 million and will now include federal educational debt amassed by parents.
Students, parents and guardians received the details in an email Friday from the Atlanta school. Smith, the founder of private equity firm Vista Equity Partners, first disclosed the gift in May during the graduation ceremony.
Smith’s pledge made national headlines and focused further attention on the soaring cost of college and the debt burden faced by graduates. Student debt has emerged as a key issue among Democratic presidential candidates. Earlier this week, Weill Cornell Medicine in New York said billionaires Sanford Weill and Maurice "Hank" Greenberg will lead a $160 million effort to curb debt for qualifying medical students there.
“It is our hope that our graduates will use their newfound financial freedom to pursue their career goals, to lead and serve the community, and to remember the spirit of the gift given to them by paying it forward to support the education of future classes of Morehouse Men,” David Thomas, the school’s president, said in a statement.
Smith’s gift is the first in a new Morehouse program in which the historically black college will solicit donations made specifically to reduce or eliminate its students’ debt, either as individuals or a class. Smith’s net worth is estimated at about $6 billion, according to the Bloomberg Billionaires Index.
More than 400 borrowers will be covered by the donation for loan balances held as of Aug. 28, the school said. Six types of loans are eligible. In addition to federal and a type of Georgia state loan, certain private student loans processed through Morehouse will also be paid. The school expects to complete the disbursement to loan service providers by spring 2020.
Some 68% of Morehouse undergraduates have taken out federal loans, in keeping with the national trend, government data show. Morehouse said Friday that the student loan debt at graduation is $35,000 to $40,000, which is higher than the average for students at historically black colleges and universities.
For federal loans taken out by parents to fund a child’s college education, the government requires little underwriting. About $94 billion is outstanding, according to federal data.
Smith, in a statement Friday, said the Morehouse program helps establish a model for colleges and universities “to receive gifts from alumni and other supporters that can offset the burden of student loans and give students the freedom to pursue their dreams, the capital to invest in the economic growth of their families and the time that they can give back meaningfully to strengthening their communities.”
To contact the reporter on this story:
Janet Lorin in New York at [email protected]
To contact the editors responsible for this story:
Alan Mirabella at [email protected]