The philanthropic act of billionaire investor, Robert F. Smith, CEO of Vista Equity Partners, gave the ultimate gift to Morehouse graduates—the promise to pay every cent of their student loans. It also gave people a sticker shock at the price of education and looming student debt crisis.
Smith pledged to wipe out student loans estimating to be $40 million. The math shows that the class of 400, if divided, would have each walked out of a liberal arts college owing $100,000 in student loan debt.
Though the act of Smith has been noted as a generous and bold philanthropic action, the numbers show the predicted next bubble. More glaring, the financial crisis of student loan defaults points to the racial wealth gap divide.
“My family is going to create a grant to eliminate your student loans!” -Robert F. Smith told the graduating Class of 2019 @RFS_Vista #MorehouseGrad2019 pic.twitter.com/etG8JhVA46
— Morehouse College (@Morehouse) May 19, 2019
While increasing numbers of Blacks and Latinos attend college, 48.7 percent of Blacks who take out student loan debt have defaulted, compared to 21.4 percent of white borrowers and about 35 percent of Latino borrowers defaulted.
Today, an estimated 77.7% of black students borrow federal student loans to pay for college. Black students also graduated with the highest amount of debt from public colleges. In 2012, the media debt load was $29,344. For private colleges, it is $35,477. Latinos fared better in public institutions with $23,441—a number lower than whites. However, Latinos who went to private non-profits are worst off with $36,266 to pay.
Added to the weight of debt that remains decades after college, racial minority groups must deal with the high levels of hiring discrimination that lower sustainable employment salaries. In particular, Blacks, in general, still face low numbers in obtaining jobs that pay them equitably, or align with their degrees, or even getting a job at all.
More troubling for African Americans is the decrease of wealth. The Institute for Policy Studies says that in a 20-year time period, from 1983 to 2013, the median African American wealth declined from $6,800 to $1,700 while media white wealth increased.
Now studies show that obtaining more education cannot fix the generations of inequities and systematic racism that has blocked Blacks out of enterprise. This is evident in Black women alumnae. While Black women are said to be the most educated group in the United States, in a 2017 report, Closing the Women’s Wealth Gap, the median wealth for single Black women was $200. For Latino women it dipped down to $100.
In 2018, the Samuel DuBois Cook Center on Social Equity report detailed that single black women were below any type of wealth. Those between the ages 20–39 and with a with a bachelor’s degree have a net worth range of -$11,000 to $0. That is a negative sign before $11,000.
While a class of Morehouse graduates have the opportunity to generate wealth for their families, millions still struggle with loan payments.
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