A Lot of Talk About a $40 Million Tuition Gift

This past Saturday, Billionaire Robert F. Smith, who made his money in private tech equities, delivered the commencement address at Morehouse College in Atlanta and promised to pay the debt for the 400 graduates in attendance.

Morehouse is no slouch institution. The all-male and almost all Black college[1] has a total cost of attendance of almost $50,000/year and an average SAT of approximately 1050, well above average for most Historically Black Colleges and Universities (HBCUs). Famous alumni include Martin Luther King, Jr., Spike Lee, Samuel L. Jackson, and Edwin Moses, and on Saturday, some future famous Morehouse graduates sat and listened to the richest Black man in America as their commencement speaker. And he got their attention. “We’re going to put a little fuel in your bus. This is my class, 2019. And my family is making a grant to eliminate their student loans.”

For these graduates, the promise of having their loan slate wiped clean by a generous gift is uplifting and inspiring. A weight off their shoulders. As one student exclaimed, “Now all of a sudden, I can look at schools I might not have considered, because I am not applying with about $100,000 in undergraduate loans.”[2]

Apparently, this wasn’t just a last-second gesture from Smith, having planned the announcement in advance. He then said this: “Let’s make sure every class has the same opportunity going forward, because we are enough to take care of our own community. We are enough to ensure we have all of the opportunities of the American dream, and we will show it to each other through our actions and through our words and through our deeds.”

And this is the nexus where the public good versus public credible digress. It is one thing to pledge debt payments for 400 people. Even so, the total is apparently at the $40 million mark. My back-of-the-envelope calculation is that 400 graduates likely have at least $80,000 in individual debt from attending Morehouse, totaling $32 million, so the $40 million estimate sounds legitimate. These students won a golden ticket. It is another thing to take care of the postsecondary student debt issue, something that Smith’s gift doesn’t even dent.

Understand that his powerful gift was for this graduating class only. Not last year’s students. Not next year’s. Only this class. Again, one must be careful: this was a wonderful thing for Smith to do, and people like Alexandria Ocasio-Cortez have suggested that this will be a powerful natural experiment, and it will, but it isn’t the only time we have seen this. We need only look at gifts from other affluent people to students and colleges, such as Gene Lang’s I Have a Dream Program, which offers elementary students’ free tuition, and New York State’s new tuition program. It will be interesting to see down the road the impact, but Smith’s gift will do little to help public policy. On the philanthropic front, there simply aren’t enough billionaires in the nation, let alone the world, to clear away student debt or arguably to make a dent in it. Even Bill Gates’ $50 million gift to Black students years ago was a drop in the bucket compared to Pell and other federal funding for students.

The only answer to student debt resides in state and federal government spending. These are the only places where there exists a mass of funds of enough heft to help cure societies ails, including student debt. That stated, there are limits to what legislators—our representatives—should do. And free tuition and the purging of loan debt isn’t an appropriate thing to do with taxpayer funds.

This isn’t a new issue for me. I’ve written about this issue perhaps too many times in prior Swail Letters and books,[3]but this latest issue deserved some commentary. There is $1.4 trillion in student debt for former college students in the US, with over half a million public four-year students taking federal loans each year plus an additional 300,000 students at private four-year institutions. To make issues more dire, students with the lowest salaries after graduation have the highest average debt loads of approximately $30,000. That number, in isolation, may not make one flinch, but understand two things: first is that this is the “average” number. For everyone who had less, there are those that have more, and sometimes much more. Second, when you earn $16,000/year, not only can you not pay your monthly loan servicing, but you can’t even pay the interest on your loan. Thus, your loan debt keeps growing, and growing, and growing. That $30,000 in debt becomes $34,000, then $38,000. All of a sudden, it is $50,000.

There are some people that think the answer to this issue is to eliminate tuition and fees. Such a bad idea on so many levels it is hard to begin but check my previous footnote and read those pieces for a primer on how impractical a public policy this would be. As well, tuition and fees at many institutions are half or less of the total cost of attendance, especially at public institutions. If they really want to eliminate cost, they have to cover total COA to erase future burdens. That isn’t possible either. And if it was, what “death panel” would determine whether a student could buy a new iPhone or Android for $1,000, even if they did use it to record classes and seminars? It gets complicated, folks.

The real discussion is the one we do not hear about. Cost. Not cost of attendance. But the cost of providing a higher education. This is what drives the tuition and fee charges that are burdening families. The elephant in the room, though, is that we have created a system of education that isn’t super related to the economy. Still, our ambitions drive us to college rather than the workforce. Even a new Lumina/Strada/Gallup report points out the benefit of non-degree credentials for the US workforce. But only whisper that fact around higher ed types, because they do not like any message other than “BA or nothing.”

These seminal events are good at getting a discussion going, but if the discussion is merely about free college, it is useless. “College,” as we’ve known it, needs to be re-visualized. The college of the 1950s isn’t the college we need now. If we truly believe in lifelong learning, then we need to look much more closely at competencies rather than credentials, and small, stackable certificates rather than four-year degrees, which have too high an opportunity cost for too many. 

[1] Official race/ethnic data from the US Department of Education illustrates that Morehouse has 0 percent White students, and 6 percent non-Black students (not counting 2 percent of two or more races).

[2]https://www.nytimes.com/2019/05/19/education/morehouse-college-robert-f-smith.html.

[3] See New York Takes the First Dive into Free Tuition(2017), A New Higher Education? Free Tuition? Again? Really? (2016), or An Open Letter to Senator Bernie Sanders: Your Free Tuition Policy is a Bad Idea (2015), or College for Free? Not Really… (2013).