LET’S TALK ABOUT IT: Could African American Philanthropy Help Solve the Black Student Debt Crisis?

Billionaires Robert Smith, Oprah Winfrey, top; Beyonce and Jay Z, bottom (photos via Creative Commons)

EDITOR’S NOTE: For some time now, we here at GBN have struggled with the fact that while our operating directive is always to present positive stories, there are so many issues that affect our communities that don’t fit that philosophy, but would love to find a way to present that doesn’t stray from our core mission. It recently dawned on us that the steps we as individuals and societies take to solve problems, large or small, could perhaps be our way in. Solutions can only come first through awareness and acknowledgement of the issue, learning about it, discussing it, then figuring out ways to act that may help solve it.

In that spirit, we introduce “Let’s Talk About It” – a new GBN feature we will occasionally present about problems that need ideas for solutions. Our first entry is a share from, appropriately enough, The Conversation, a website GBN has partnered with to bring to you exactly this type of content.

First up: How can we as a community begin to solve the black student debt crisis? Should we follow the lead of billionaire Robert F. Smith, who single-handedly relieved the debt of Morehouse College’s graduating class of 2019, and task the wealthiest among us to pitch in and help out? Or are there other ways for us to alleviate this issue? Read below, and if you’d like, let’s discuss!

-Lori Lakin Hutcherson, GBN Founder and Editor-in-Chief

From The Conversation:

by Mako Fitts Ward, professor at Arizona State University 

When billionaire Robert F. Smith decided to pay off the student loans of the graduating class of 2019 at Morehouse College, he suggested that others follow his lead.

“Let’s make sure every class has the same opportunity going forward, because we are enough to take care of our own community,” Smith declared in his commencement speech.

But is there even enough black private wealth in the United States to pay off all black student loan debt?

As a scholar in social transformation and African American studies, I’m intrigued by this question. It provides an opportunity to examine black wealth, higher education and the possibilities for alleviating debt, which in turn opens the door to new economic opportunities.

Black celebrities give to higher education

Smith’s gift is estimated to be worth US$40 million and will benefit 396 students.

That’s a lot of money, and he’s done it before. Before his gift to Morehouse, Smith donated $50 million to Cornell University, his alma mater, in part to support African American and female students at Cornell University’s College of Engineering.

Other black celebrities have also stepped up to fund education. Powerhouse couple Beyonce and Jay Z gave more than $1 million in scholarships to students who lived in cities they were touring in 2018.

Rapper Nicki Minaj gave 37 “Student of the Game” scholarships. LeBron James, through his foundation, promised to pay for 2,300 students to attend the University of Akron – at an estimated price tag of $100 million. Oprah Winfrey has donated more than $400 million to educational causes.

But with just five black billionaires in the United States – Smith, Winfrey, David Steward, Michael Jordan and Jay Z – monumental gifts like the one that Smith made will likely be few and far between.

Is Smith’s claim that “we are enough to take care of our own community” true of all the black wealth in the U.S.?

Philanthropy among African Americans

A strong heritage of black philanthropy dates back to mutual aid societies of the 1700s and 1800s in which free blacks sought to help fellow blacks facing hardships or distress and, in later years, in need of education and job training.

Black charitable giving also arose from the black church and fraternal organizations throughout the 1800s and 1900s with movements such as abolitionism, the Black Women’s Club Movement and the civil rights movement.

Mary Church Terrell, the first president of the National Association of Colored Women, described how charitable organizations had “a keen sense of the responsibility” to secure economic and educational resources, “lifting as we climb” up the ladder of social mobility. This ethic of giving was also present among the early black economic elite such as Thomy Lafon, Madame C.J. Walker and James Forten.

Black giving remains strong to this day. Despite racial wealth gaps, black families contribute larger portions of their wealth than any other racial and ethnic group. The W.K. Kellogg Foundation reports that two-thirds of all black households donate to charitable causes. This giving amounts to about $11 billion annually, most of which goes to religious organizations.

But how much of it goes to higher education? African Americans across the socioeconomic spectrum report donating 17% to education – both K-12 and post-secondary institutions and scholarship funds. That adds up to about $1.8 billion donated annually.

Counting black millionaires

The percentage of black households worth over $1 million has remained at or below 2% since 1992, or about 877,000 based on 2018 population estimates.

Among black high net worth households – those with a net worth of more than $1 million (not counting the value of their primary home) or with an annual household income of $200,000 – 49% report giving to higher education. This is significant since across all racial groups, the share of dollars donated by high net worth individuals to higher education was only 4%.

Black student loan debt

Student loan debt in the U.S. reached an all-time high in 2019, making it the second-highest consumer debt category behind mortgage debt. Over 44 million borrowers owe roughly $1.5 trillion in student loan debt.

Looking at 2016 data, 86.4% of blacks completing a bachelor’s degree had some form of student loan debt, and the average amount borrowed was $34,010. If we multiply the total number of blacks that graduated with some form of debt – roughly 168,000 – by the average amount borrowed per individual, the average cumulative debt for this one graduating class was roughly $5.7 billion. This includes graduates from all colleges – public as well as private – but not community colleges.

Of course, looking at it at the most basic level, the collective wealth among America’s black billionaires – which totals $13.4 billion with the recent addition of Jay-Z – can easily subsidize the debt of a single graduating class.

And while a more sophisticated calculation is undoubtedly warranted, a rough estimate shows that the $5.7 billion in black student debt could be covered by America’s black millionaire households if each one chose to devote $6,500 toward eliminating the overall debt.

Of course, the debt load for black students goes far beyond one graduating class. The majority of blacks in the labor force that hold a bachelor’s degree or higher have some form of student loan debt. This means that the figures for the entire black population with outstanding student loan debt across generations are significantly higher than $5.7 billion.

Robert Smith’s gift to the class of 2019 at Morehouse provoked an interesting discussion about whether black philanthropy can alleviate black student loan debt. However, one-off philanthropic efforts that help a small group of beneficiaries can’t compete with the kind of large-scale change needed to alter the course of an entire community.

What do you think? Let’s talk about it!

9 thoughts on “LET’S TALK ABOUT IT: Could African American Philanthropy Help Solve the Black Student Debt Crisis?”

  1. One way to begin to alleviate this is to take that collective billion dollar power and invest it. If each million dollar household added one more thousand, and the five billionaires added, say, 1 million apiece, and invested it, that overage would total $882 million to start. After ten years at an average of about 7.5% return, that amount invested (without taking any out) would amount to about $1.8 billion. If initial amounts were doubled for a starting total of $1.7 billion, after ten years, it would be worth over $3.6 billion.

    What if we did this in waves? Perhaps commit to giving that amount (to a well-run collective investment fund specifically for this purpose) every ten years, invest it, and then utilize it as a blanket investment for Black student loan debt, perhaps in the approximate ratio that any given person has as a total of the collective student debt.

    For example, this could be done with specific graduating classes, perhaps similarly by decade, with the first wave of funding going to people who graduated in (say) the 90s decade, or something similar. And what if there was a registry attached to this fund, so people with student debt could choose to participate or not, and if choosing participation, have to register with certain details (such as how much they owe, and what year they graduated, etc.), and thus when their decade came up to be paid off, this process was streamlined and the information was already given. A certain percentage would be set aside to pay for previous decades who hadn’t signed up when their time came. We could also take out a certain percentage each year to begin to cover the debt more immediately, utilizing the percentage of what’s owed, as above.

    Additionally, if instead of $6500 from each million dollar household, they gave $10,000, and keeping the billionaires at 2 million each, the excess of $3500 plus the $10 million would yield $6.3 billion at the end of the same ten years.

    This is a rough outline, but it certainly could be done if we utilized our collective power. And as any long-term investment goes, the sooner it is started, the higher the yield.

    I do not disagree with David’s previous comment. And, historically, Black people have not been able to count on or even trust the U.S. Government to take our best interests at heart.

    1. I even like the idea of crowdsourcing this as well, with parents who intend to send their kids to college, or who have already done so (along with people who simply want to contribute what they can afford, regardless of whether or not they are going, or have gone, to college).

      Would this be something requiring attendance at an HBCU, or State College? Would we restrict this only to Black students? And how could we do that?

      And of course one must keep in mind that anything we set up to take care of ourselves would instantly be attacked through lawsuits or even the government itself? White people seem to hate it when we try to take care of our own problems, while telling us to take care of our own problems.

    2. Another possible breakdown of initial investment could be 1% of individual net worth, which also might be doable for a good chunk of the rest of the population to offer as well. Perhaps the parameter would be for those households making over a certain annual salary (such as $50,000), so as not to cause additional financial hardship for people who have lower incomes, or for whom it would cause a financial hardship to offer that 1%. Again, the idea is to leverage the influential power of the collective.

    3. I think this is fabulous idea. As someone who works with college students I would definitely set this up to pay off loans for those who finish college before venturing into helping kids get to college. I see so much money wasted by students from all backgrounds whose parents or investors have paid up front for them. But rewarding the hard work and perseverance afterwards through invested funds seems like fabulous idea. Or maybe some students feel not hindered by their debt so only those that do apply to get it covered? This is exciting idea especislly for first generation college students and those students who want to make a difference in the world and are afraid to take that type of job due to debt

  2. Why do we need to only solve issues for us? How can we be seen as the same if we let them convince us we are different?

    I believe we in America have a big problem. It African-American, asian-american, mexican-american.

    Brits are Brits, few ch are French.

    I am black, but I am american.

    I don’t want rich people doing this. I want the government, we the people, to fix this, for everyone.

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