Welcome to Race on Campus. Black college students owe more on their education loans than their white peers after graduating. That disparity prompted Robert F. Smith, a billionaire tech investor, to start the Student Freedom Initiative with corporate partners — and help from Family Feud‘s Steve Harvey. The nonprofit gives flexible loans and grants to juniors and seniors who are in good academic standing and are majoring in STEM fields. Recipients pay money back based on their post-graduation earnings. Our Katie Mangan has the the story.

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Whittling Away at Racial Disparities

When Robert F. Smith stunned the graduates of Morehouse College’s Class of 2019 by announcing that he would pay offall of their student loans, the billionaire tech investor hoped for a ripple effect that would ease the crushing debt burdens of thousands of future students at other historically Black colleges and universities.

The ripple his gift set in motion became a wave this month, when two other wealthy Black philanthropists, the television personality Steve Harvey and his wife, Marjorie, joined forces with Smith and his corporate partners. The result was an expansion from nine to 29 HBCUs participating in the Student Freedom Initiative, a nonprofit Smith started this year and plans to extend to other minority-serving institutions next year.

The initiative has four parts aimed at keeping students from taking out rigid, expensive loans, giving them academic support and work experience, and upgrading the technology infrastructure of their campuses.

One major goal is whittling away at racial disparities in loan debt. When they graduate, Black college students owe an average of $7,400 more than their white peers, according to a 2016 report from the Brookings Institution. Four years later, they owe nearly $53,000 more.

Much of that debt consists of parent PLUS loans, federal loans with high interest rates that are often doled out to families who will struggle to pay them back. Low-income families turn to them when Pell Grants and other means of support aren’t enough to cover the bills. HBCUs are constrained in their ability to offer scholarships, in part because of decades of discriminatory fundingby their states. That’s another reason HBCU students tend to take on more debt than those who attend predominantly white institutions.

The Student Freedom Initiative disburses up to $20,000 per year to juniors and seniors who are in good academic standing and are majoring in STEM fields. Recipients pay the money back based on how much they’re earning after college. For every $10,000 they borrow, they pay back 2.5 percent of their salary each year.

Interest rates are based on income, but don’t top 4.3 percent, said the nonprofit’s executive director, Mark A. Brown, a former chief operating officer with the U.S. Department of Education’s Federal Student Aid Office. That’s far less than the 7.25 percent that parent PLUS loans cost families in interest and origination fees, he said.

Students aren’t required to make any payments while they’re in graduate school or earning less than $30,000 a year. They can defer payments for up to 12 months without penalty, and without having to prove a financial hardship. After 20 years, any remaining debt is forgiven. About 100 students at the nine campuses in the initial cohort took advantage of the offer this fall. Based on the amount of money raised so far, the program could serve more than 3,000 students each year, Brown said.

Unlike with parent PLUS and private loans, Smith said in an interview with Afro News this year: “You’re not paying it back to the federal government. You’re paying it into a fund which then recirculates to the next generation of African American students.” If a student takes a job teaching chemistry in a low-income community — a choice that might be off the table if a they’re faced with rigid, fixed repayment terms — there’s no obligation to pay anything back as long as the salary’s less than $30,000.

An Economic and Moral Imperative

Colleges have tried different tactics to reduce the disproportionate debt burden Black families face, including forgiving outstanding balances. What sets the Student Freedom Initiative apart from those efforts, Brown said, is that it creates a self-sustaining endowment and a way to avoid rigid, high-interest loans altogether, rather than a one-time fix.

Default rates are considerably higher among Black college students, and sometimes it’s because they didn’t graduate. “That could result from something like a broken-down car or a camera that doesn’t work on a computer so they can’t participate in Zoom classes,” Brown said.

The Student Freedom Initiative plans to offer emergency grants of up to $500 to students to keep them enrolled. The nonprofit pays 75 percent of the cost, and the participating college the other 25 percent. All sophomores and above — not just STEM majors — are eligible to apply for paid internships and mentorships at the nonprofit’s partner companies.

The program is funded through a $50-million personal gift from Smith and $50 million from a charity he founded. Other donors include AVC Technologies, Walmart, Educause, and the United Negro College Fund. Cisco kicked in $150 million, most of which will be used to help HBCUs upgrade their technology to ward off cyberattacks. Colleges that distribute federal financial aid must comply with federal cybersecurity requirements, and many HBCUs don’t have the money or staffing to do it alone.

Removing barriers to economic and social mobility, Smith said, is “not just an economic imperative, but a moral one.” —Katie Mangan

Read Up

  • Last year Ahmaud Arbery, a 25-year-old Black man, was chased by three white men and shot to death while he was jogging through a Georgia neighborhood. One of the men used a racist slur after shooting Arbery, according to a co-defendant. Yet in the courtroom, prosecutors have largely avoided discussion of race. (The New York Times)
  • The University of Southern California is renaming its center for public affairs after Joseph Medicine Crow, the first member of the Crow people to earn a master’s degree. (USC)
  • Speaking of renaming campus buildings, the University System of Georgia announced it would not remove names of people connected to slavery or racism — a rejection of its advisory group’s recommendations. Sarah Brown explains the decision in a Twitter thread, and Eric Kelderman has a story on it. (The Chronicle, Twitter)