Black Billionaire Robert F. Smith to Donate $50 Million to Support STEM Students at HBCUs
Posted By: Will Moss on October 22, 2020 |
WASHINGTON--(BUSINESS WIRE)--The Student Freedom Initiative announced today a $50 million personal gift from Robert F. Smith, philanthropist and Founder, Chairman and CEO of Vista Equity Partners. This gift matches the initial funding of $50 Million provided by the Fund II Foundation, announced in June 2020.
Student Freedom Initiative is a public charity whose mission is to serve as a catalyst for freedom in professional and life choices for students attending Minority Serving Institutions. The Initiative will offer a student and family centric income-contingent payment alternative to the crushing burden of high cost, fixed payment debt in the context of our commitment to a program that provides holistic support to students and capacity building support for participating institutions. Equally important, the Initiative offers paid internships in a student’s area of study, tutoring/mentorships, and targeted HBCU capacity building.
“Each year, thousands of black graduates from HBCUs across America enter the workforce with a crushing debt burden that stunts future decisions and prevents opportunities and choices,” said Robert F. Smith, who is also the Board Chair of the Student Freedom Initiative. “A college education should empower and prepare our next generation for a limitless future. The Student Freedom Initiative is a culmination of work that followed my gift to the Morehouse College Class of 2019. The $1.6 trillion student debt crisis in our country is a human rights crisis. The Initiative is purposefully built to redress historic economic and social inequities and to offer a sustainable, scalable platform to invest in the education of future Black leaders. I urge others to join this important cause so that together we can liberate the human spirit.”
With 65% of Black wealth consumed by the intolerable burden of student debt, the Initiative was initially established to create onramps to jobs of the 21st century. Following Smith’s historic gift to eliminate the student debt of all 2019 Morehouse College graduates and their parents, the team identified the systemic problems with the current student loan structure. With limited options, many students and their families have little choice but to turn to Parent PLUS loans and private loans that account for well more than half of the debt incurred to attend HBCUs.
“This is the only structure that we know of that has been built for HBCUs to support students at scale and that does not depend on the endowment of a university or funding by for-profit funders,” said Dr. Michael Lomax, CEO of UNCF and Board Member of the Initiative. “Robert F. Smith’s extraordinary philanthropy is a giant first step toward a self-sustaining pool of funds that we can invest in promising students, particularly those pursuing STEM careers.”
Additional Board Members include Robert F. Smith, Vista Equity Partners Founder, Chairman and CEO (Board Chair); Henry Louis Gates Jr., Director of the Hutchins Center for African and African-American Research at Harvard University; Linda Wilson, CEO of the Fund II Foundation; Bob Jain, Founder and Chairman of the Jain Family Institute and Co-Chief Investment Officer of Millennium Management; Jim Runcie. Education Finance Institute Co-founder and Executive Director; and Keith B. Shoates Executive Director of Student Freedom Initiative.
The Initiative will begin operations with 11 HBCUs that will be announced before the end of November. The program is intended to be made incrementally available to all qualifying STEM juniors and seniors at all HBCUs over the next five years, following the fall 2021 academic year.
ABOUT THE STUDENT FREEDOM INITIATIVE
The Student Freedom Initiative, a 501(c)(3) nonprofit organization dedicated to ensuring freedom in professional and life choices for junior and senior students earning science, technology, engineering and mathematics (STEM) degrees.
What is the Student Freedom Initiative?
The Student Freedom Initiative, a 501(c)(3) public charity dedicated to ensuring freedom in career and life choices for students attending Minority Serving Institutions (MSIs), with an initial focus on juniors and seniors earning science, technology, engineering and mathematics (STEM) degrees at Historically Black Colleges and Universities (HBCUs).
The Initiative provides an income-contingent payment obligation alternative to high cost, fixed payment Parent PLUS and private debt obligations. It offers flexible payment obligations contingent on income (if any) that the participant earns each year.
The Initiative provides holistic services, which include internships, tutoring/mentoring, and targeted HBCU capacity building.
Student Freedom Initiative was launched with a $2 million initial contribution and a $50 million pledge from the Fund II Foundation in June 2020.
Who are the people bringing the Student Freedom Initiative to life?
Robert F. Smith, Vista Equity Partners Founder, Chairman and CEO (Board Chair)
Michael Lomax, CEO of the United Negro College Fund
Henry Louis Gates Jr., Director of the Hutchins Center for African and African-American Research at Harvard University
Linda Wilson, CEO of the Fund II Foundation
Bob Jain, Founder and Chairman of the Jain Family Institute and Co-Chief Investment Officer of Millennium Management
Jim Runcie, Education Finance Institute Co-founder and Executive Director
Shoates, Executive Director of Student Freedom Initiative
Fred Goldberg, Former Commissioner of the IRS and an attorney at Skadden, Arps, Slate, Meagher & Flom (outside counsel)
Michael Stynes, Trustee and CEO of the Jain Family Institute
The Initiative will partner with Business Roundtable companies as part of the BRT’s Racial Equity & Justice initiative
Why was Student Freedom Initiative created?
65% of the wealth of African American families is tied up in debt incurred for education.
To provide onramps to jobs of the 21st century, the Initiative was created to address the disproportionate student loan debt burden faced by too many students of color.
The Initiative is intentionally designed to be student-centric both in its terms and how it is administered.
The Initiative is a “pay it forward” program:
donated capital and payments made by participating students is what permits a self-sustaining program that benefits future generations of students and their families.
it liberates students to give back to their communities and support the HBCUs they graduate from in ways that would otherwise not be possible.
How does it work?
The Student Freedom Initiative will offer students an income-contingent payment obligation alternative to fixed payment Parent PLUS and private debt obligations.
The absence of fixed payment obligations gives participants the freedom to choose and change careers and make life choices and protects them from the unfortunate turns that life sometimes takes.
An integral part of the Initiative’s strategy is to implement a holistic student program (including mentoring and training; access to internships and jobs; and the technology resources they need to pursue their studies) and targeted HBCU capacity building (e.g., discounted devices for students, infrastructure modernization support, STEM program certification support, pipeline for graduate programs).
Every $10 million invested in the program will cover 100 new STEM students at HBCUs every year, forever.
What are Key Terms of Student Freedom Initiative’s Contingent Payment Obligations?
Equity and community: same terms for all students and all schools
Better terms for all students: APR rather than dollar cap designed so cost for all participating students is less than cost of Parent PLUS and private loans
Progressive: while lower cost for all participants, terms are progressive consistent with Pay It Forward design
Term: maximum duration of the obligation is 20 years, regardless of how much (if any) the student has paid, even if it is less than the funded amount
Threshold: income below which there is no obligation to make payments is $30,000
Freedom of Choice: Income contingent payments mean that participants have the freedom to make career and life choices
Downside Protection: income contingent payment obligation means that participants who are unable to find or lose a job or face life challenges beyond their control (such as an accident or illness) are not subject to high cost, fixed payment obligations.
What makes the Initiative unique?
It’s a non-profit public charity committed to students, families, HBCUs and community.
Its commitment to meaningful paid internships, mentoring, and other servicers for students and capacity building support of HBCUs.
The student centric terms of its contracts with students offer additional protections, including for example:
Participant’s obligation terminates on bankruptcy, permanent disability or death.
Participants can elect to defer 12 monthly payments for any reason (no need to show hardship, do not have to be consecutive, and can be renewed by paying off prior deferrals).
Participants can elect to make voluntary contributions to their alma maters.
Participants will have a strong reason to “do what’s right” in making their payments because their payments go to support future generations of students.
Who is eligible to participate?
The program will initially be open to qualifying juniors and seniors who are STEM majors as defined by their HBCU.
Student eligibility requirements being full-time and in good standing.
Where will the Student Freedom Initiative be implemented first?
The Initiative will launch at up to 11 HBCUs that are being confirmed and announced before the end of November.
When will it start?
The Initiative is planning an incremental roll out starting with the Fall 2021 semester and adding additional HBCUs each year.
How many students and schools will it reach at scale?
Student Freedom Initiative’s current goal is that six years from launch, its program will be available all qualifying STEM juniors and seniors at all HBCUs.
We project that we will be providing two years of income-contingent funding in lieu of high cost, fixed payment Parent PLUS and private loans for 5,000 new participants each year in perpetuity.
Sample student choices
Student 1 graduates with a double major in biology. She has a remarkable career in the pharmaceutical or high-tech industry and spends time in senior government positions at NIH, NASA or the Department of Defense. She benefits more favorable terms than Parent PLUS loans, but more importantly from downside protection if things had not gone as well.
Student 2 graduates with a degree in physics. After two years in the industry he switches careers and becomes an inner-city high school physics professor who equips and inspires decades of African American students to pursue careers in science and technology. Student 2 benefits because he could not have afforded the career change but for the income contingent financing provided by the Initiative.
Student 3 graduates with a degree in computer science. After several years in the industry, he decides to head out on his own, investing all of his savings in a tech start up where he earns next to nothing for three years before he hits it big. Student 3 could never have gone down this road but for the income contingent financing provided by Student Freedom Initiative.
Student 4 graduates with a degree in electrical engineering. After several years in the industry she decides on a career change. She spends 3 years at law school and a career successfully litigating landmark social justice cases. Student 4 could never have gone down this road if she’d been saddled with fixed payment, high cost college loans.
Student 5 graduates with a degree in chemistry. After several years in the industry he decided to take 4 years off to care for an aging parent or child with special needs. Student 5 could never have made this life choice if he’d been saddled with fixed payment, high cost college loans.
Student 6 graduates with a degree in mathematics. Unfortunately, in the post-COVID world it takes him three years to find a job in the city where he lives for family reasons. Student 6 could not have made it through if he’d been saddled with fixed payment, high cost college loans.
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