Billionaire to pay off $40 Million college debt for Morehouse College class of 2019

Imzadi

♥ Saved by an angel in a trench coat!
Joined
Oct 29, 2004
I love true stories like this. :cloud9:

Yesterday, a rather unknown billionaire, Robert F. Smith, whose estimated net worth is $5 billion according to Forbes, for being the founder & CEO of a tech company, was giving a commencement speech to the 400 students of the graduating class at Morehouse College in Atlanta, GA. He had given a copy of his speech, ahead of time, to the college. However, he left out this next part, so even the heads of the college didn't know what was coming: where he announced that he and his family would pay off all the graduating class' student loans via a grant — estimated at $40 million. :worship: :woohoo: :dance3: :tongue: :yay:


"A billionaire technology investor stunned the entire graduating class at Morehouse College when he announced at their commencement Sunday that he would pay off their student loans — estimated at $40 million.

Robert F. Smith, this year’s commencement speaker, made the announcement while addressing nearly 400 graduating seniors of the all-male historically black college in Atlanta. Smith, who is black, is the Founder and CEO of Vista Equity Partners, a private equity firm that invests in software, data, and technology-driven companies.

“On behalf of the eight generations of my family that have been in this country, we’re gonna put a little fuel in your bus,” the investor and philanthropist told graduates in his morning address. “This is my class, 2019. And my family is making a grant to eliminate their student loans.”

The announcement immediately drew stunned looks from faculty and students alike. Then the graduates broke into the biggest cheers of the morning. Morehouse said it is the single largest gift to the college.

Smith, who received an honorary doctorate from Morehouse during the ceremony, had already announced a $1.5 million gift to the school. The pledge to eliminate student debt for the class of 2019 is estimated to be $40 million.

Smith said he expected the recipients to “pay it forward” and said he hoped that “every class has the same opportunity going forward.”

“Because we are enough to take care of our own community,” Smith said. “We are enough to ensure that we have all 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.”

In the weeks before graduating from Morehouse on Sunday, 22-year-old finance major Aaron Mitchom drew up a spreadsheet to calculate how long it would take him to pay back his $200,000 in student loans — 25 years at half his monthly salary, per his calculations.

In an instant, that number vanished. Mitchom, sitting in the crowd, wept.

“I can delete that spreadsheet,” he said in an interview after the commencement. “I don’t have to live off of peanut butter and jelly sandwiches. I was shocked. My heart dropped. We all cried. In the moment it was like a burden had been taken off.”

His mother, Tina Mitchom, was also shocked. Eight family members, including Mitchom’s 76-year-old grandmother, took turns over four years co-signing on the loans that got him across the finish line.

“It takes a village,” she said. “It now means he can start paying it forward and start closing this gap a lot sooner, giving back to the college and thinking about a succession plan” for his younger siblings.

Morehouse College president David A. Thomas said the gift would have a profound effect on the students’ futures.

“Many of my students are interested in going into teaching, for example, but leave with an amount of student debt that makes that untenable,” Thomas said in an interview. “In some ways, it was a liberation gift for these young men that just opened up their choices.”"

Source: http://time.com/5591614/billionaire-paying-off-student-loan-debt/


In case you think he might have spoke impulsively, Smith actually has a history of giving. And he was one of the first of a group of ultra-wealthy to sign Bill and Melinda Gates' "Giving Pledge." A pledge to commit to giving more than half of their wealth to philanthropy. He's already making good on that pledge. :thumbsup2

May this graduating class, who has had their tremendous college financial burdens lifted from them, do great things with the opportunities this now gives them.
 
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Klayfish

DIS Veteran
Joined
May 19, 2016
Humanity never ceases to amaze. Beyond fabulous!

I wonder how many people simply :faint: upon hearing the news. :D
 
  • BrianL

    Doom Buggy Driver
    Joined
    Jul 24, 2013
    That's a really wonderful thing to do. The cost of education is staggering these days. How great for these students to be able to start their careers with no debt from school hanging over them. Great job, Mr. Smith!
     

    FlightlessDuck

    Y kant Donald fly?
    Joined
    Jun 20, 2006
    Vista Equity Partners is a venture capitalist firm. They mostly own (or partially own) software companies, like PowerSchool, Forcepoint, TIBCO, mediaocean, etc.
     
  • QueenIsabella

    DIS Veteran
    Joined
    Jan 17, 2016
    What a fabulous gift! If you read a little bit about him, he's pledged to give away a lot of his money, and has been doing so in some interesting ways. Good for him, giving those students a boost!
     

    ronandannette

    I gave myself this tag and I "Like" myself too!
    Joined
    May 4, 2006
    Morehouse is in Atlanta, Georgia.

    The HBCU world has been going crazy! This is absolutely amazing. Those 400 Morehou!se men will definitely take the world by storm!
    I did not know there was such a thing as an all-male (or all female if that had been the case) university. I learn things on the DIS...:thumbsup2
     
  • GrnMtnMan

    DIS Veteran
    Joined
    Oct 2, 2008
    I wonder how many of those kids realize the tax implications of that gift?
    If its considered a gift, the giver of the gift pays the taxes. If its a prize or an award, then there would be implications for the recipient. I'm not clear on what makes something a gift versus a prize, but I'm sure there's guidance out there somewhere.

    ETA: here's one opinion https://www.legalmatch.com/law-library/article/prize-and-award-taxes.html

    How Are Prizes Distinguished from a Gift?
    Prizes and awards are usually given in recognition for some affirmative act by the recipient, such as entering into a contest, giving an exceptional performance in work, or inventing something new. A gift, on the other hand, usually depends on the intent of the donor. The donor normally makes the payment with detached and disinterested generosity. A payment primarily made out of moral or legal obligations or for some past services of the recipient is usually not a gift. Generally, a gift will require no actions from the the recipient.

    Are There Exceptions to the Taxability of Prizes and Awards?
    Yes. Certain qualified scholarships and fellowships are not taxable, even if they are prizes and awards. Furthermore, awards given for recognition of scientific, religious, artistic, literary, charitable, educational, and civic achievements are not taxable if:

    1. The recipient is chosen without any action on his/her part (e.g., entering into a contest or submitting work for review);
    2. The recipient cannot be required to provide substantial future services as a condition to receive the award; and
    3. The recipient must assign the award to charity (i.e cannot be used by the recipient or certain closely related members)
    Thus, even Nobel and Pulitzer prizes are taxable to the recipient if they do not satisfy the above three conditions.
     

    Mickeyluver37

    Currently Disney Deprived
    Joined
    Dec 17, 2001
    I found this article interesting regarding the taxes:

    https://www.forbes.com/sites/kellyphillipserb/2019/05/19/billionaire-robert-f-smith-promises-to-pay-off-student-debt-worth-millions/#3d13b47c59f5

    "The recipient of a gift isn't subject to federal income tax on a gift. And if any gift tax is due, gifts are subject to the federal gift tax rules, which means that the giver, not the recipient of the gift, is responsible for the tax. In other words, the recipient of a gift - in this case, each student - isn't responsible for paying tax (income or gift tax) on the gift.

    As for Smith? The annual gift exclusion amount for 2019 is $15,000 per person. That means that if the gifts were made directly to the students, Smith would be able to exclude $15,000 per student ($30,000 if he splits gifts with his wife, Hope). Gifts over that amount would typically be considered taxable gifts (meaning taxable to the donor). Some Morehouse students reported that they shouldered loans of close to $100,000, more than the annual exclusion amount - but it appears that won't matter. When Smith told the class about the gift, he stated that "my family is making a grant to eliminate their student loans." In other words, it sounds as though the funds are payable as a grant through the college which likely mitigates any gift tax consequences.

    If Smith had paid the tuition of each student directly to the college as they went, that would have not have been considered a taxable gift. That's because checks written directly to a qualifying educational institution for tuition or to a health care provider for medical expenses are not subject to the gift tax even if they exceed the annual exclusion. However, the educational exclusion is only for tuition and not for books, supplies, room and board, or similar expenses (those would be taxable gifts)."
     

    jo-jo

    DIS Veteran
    Joined
    Feb 28, 2011
    Ok sour grapes here.....what about the kid that worked three part time jobs and ate PB sandwiches for 4 years vs the kid that partied and just made it to graduation.

    But to the giver of the gift....WOW.
     

    RedAngie

    80's New Wave Girl
    Joined
    Sep 10, 2015
    I did not know there was such a thing as an all-male (or all female if that had been the case) university. I learn things on the DIS...:thumbsup2
    There are still several all-male and about two dozen all-female colleges in the U.S. There used to be hundreds more. Morehouse's all-female counterpart in Atlanta is Spelman College.

    The elite Ivy League schools used to be all-male. Some didn't go coed until the 1970s. There was a collection of all-female colleges called the Seven Sisters that was considered comparable to the Ivy League. A few, Smith, Wellesley, and Mount Holyoke are still all-female.

    +++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

    $40 million for 400 graduates is an average of $100,000 per student.
     

    longboard55

    DIS Veteran
    Joined
    Oct 9, 2014
    The days of working 3 part time jobs to pay tuition are over, that ended in the 80s. Tuition is way over the part time job level today
     

    BrianL

    Doom Buggy Driver
    Joined
    Jul 24, 2013
    The days of working 3 part time jobs to pay tuition are over, that ended in the 80s. Tuition is way over the part time job level today
    Well, I did it in the 90's at a state school. The tuition was still manageable and I got out with zero student loan debt. My parents did help, but only a little. I was amazed though at what a friend of mine paid to go to the same school just a little while after I did. It had skyrocketed!
     

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