Philanthropy and the Student Loan Crisis
June 05, 2019 | Ali Eskandarian
Robert F. Smith’s generous gift to the Class of 2019 at Morehouse College dominated higher education headlines during graduation week. In his commencement address, Mr. Smith—the billionaire CEO of Vista Equity Partners—promised to pay off the student loans of the College’s graduating class, a gift estimated at $40 million.
As an act of generosity, one could hardly have a more meaningful impact on individual students. Mr. Smith renewed the promise of higher education for those graduating students who have been unexpectedly (and happily) relieved from the heavy burden of debt as they take the next steps toward realizing their dreams.
Yet, the celebration of Mr. Smith’s substantial gift hides a widening gap. This act of remarkable generosity is only a Band-Aid on a much larger wound—the financing of higher education.
It is admirable that philanthropists, like Mr. Smith, are willing to address the challenges of higher education financing for students after the fact by erasing the debt they accrued. But his act of generosity begs the question—how did 396 students acquire more than $40 million in student loan debt in the first place?
For future philanthropists who might be contemplating the impact of similar acts of generosity, the system as a whole could benefit more from well-structured gifts that encourage colleges to spend responsibly, and by donations to establish new scholarships that reduce the cost for students and their families.
If done thoughtfully and structured meaningfully, scholarships are more effective in steering the higher education enterprise in a more sustainable direction. Their availability has a direct bearing on the decisions students make before they embark on the college experience.
Similarly, the institutions of higher education benefiting from the largess of philanthropy in scholarships would be committing to a certain course of action mutually agreed upon with their donors. As one of the multitude courses of action needed to save higher education financing in the long run, contributions to scholarships may just have a better chance than forgiving the debts already accrued.