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Billionaire pays off graduates' student loans

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MJ DeMarco

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Happy graduation! Billionaire pays off Morehouse College grads’ student-loan debt

Why Robert F. Smith’s pledge to pay off Morehouse loans is a turning point for colleges and the billionaires that support them

Interesting that the billionaire is a billionaire because he's a part of a private equity firm. In other words, he's not saving pennies and investing it with Wall Street. He's a part of the Wall Street machine. Same old, same old -- preach the Script while not living by it, but instead serving it.

I'm sure this gift has colleges a bit frightened-- instead of the money/grant going to the college where they can launder it through the university industrial complex, building fancy architecture and increasing tenured salaries, it should be going directly to the kids.

Not sure if handing out "freebies" is a good precedent.

Everyone loves free stuff and free stuff is rarely appreciated.
 
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Never1

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My reaction was mixed. It's definitely a cool thing to do, as a gesture, but I have a gut feeling that this "gift" may simply cause many of the students to pile on new debt, sidewalk-style. Who knows? We will need to see where they are in 20yrs, to assess wether this was a helpful thing or hurtful thing, when compared to similar students who still had the debt.
 

ZCP

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means they can buy cars and a bunch of stuff on credit now ......

a better gift might have been to ask them to contact him in 3 years, if they have made some impact on the world, he pays off their student loan
 

EVMaso

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I read about that a few days ago and have decided that I really dislike the move. I think it's going to impress upon those kids that no matter what they do there will be someone or something that will eventually come and bail them out. People need to learn that decisions made have consequences that must be dealt with.

For the record I had a mid-5 figure amount of student loan debt that I paid off on my own through sacrifice and hard work. Financially I would be well ahead if someone came out and just wiped it away, but I think I'm better for having done the work to pay it off on my own.
 
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luniac

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Great, now graduates gonna expect free vacation days from their boss.
 

Jsoh

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Nice gesture, but I think the lesson of paying for a bad investment needs to be learned...

Not saying that everybody in college ends up in the red, but you get what I mean.

Paying for people's tuition gives them an "in" to make the same mistake again in another form.

Plus, I thought the reason you go to school is to make some dough? If the process worked then there would be no need for somebody to help you "get out of jail free"...
 

wordwarrior

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Just wanted to add a footnote to all this talk of university funding. Quebec has the lowest tuition fees in Canada, with average tuition less than CAD 3,400, less than half what it is in the highest tuition province of Ontario and slightly lower than the runner up: Newfoundland.

Canada's Average Tuition Costs Were Just Revealed And These Provinces Are Surprisingly The Cheapest

The flip side is that income taxes, sales taxes, are much higher. Also, instead of universities being flush wish cash, there's a good case to be made that they're underfunded. When they lobbied for higher tuition fees, the students responded with the 2012 student strikes:

2012 Quebec student protests - Wikipedia
 
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AgainstAllOdds

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Wow, there's a lot of negativity in this thread.

According to google, Robert F. Smith's net worth is $5 Billion. That means that $40MM is 0.8% of his net worth. Think about that. It's like a millionaire, being worth $1MM, donating $8,000. It doesn't matter to him.

The guy has reached a point in this life where he has so much F*ck you money that he can pick and choose causes like this that shake the internet without it having any impact on him; meanwhile, we're here scrutinizing his act as if it actually matters.

Do you know what happened because of his donation?

He became the face of the black business community. He went from being some obscure rich guy to a nice, loving guy that's richer than Oprah. His brand grew overnight 100 fold and will likely pay dividends far greater than the amount he donated.

Suddenly every single young black man and woman wants to work for him. People want to do deals with him out of goodwill. And no one in the world can talk trash to him as if he's "not a good guy". If he has political ambitions, he set himself up perfectly. On top of that, I'm sure his Playboy wife is prouder than ever to have married him.

As far as whether this is good or bad for the students, who cares. It's an experiment that no one before had the balls of conducting. What this guy did is help all of these students start off their adult lives with zero debt. It's no different than having a rich grandpa that paid for someone's college. Now, he can sit back and see exactly what kind of impact it has over the course of the next 20 years - something that no one in this thread or on the internet knows.

In my opinion, these kids are a lot better off now than they ever would have been without the gift. The average student debt was $100,000 (which is criminal, but that's a conversation for another topic). At 8% interest, that's $8,000 a year that these kids have to pay off.

The average starting salary for Moorehouse is $40,000. It's $48,000 ten years after graduation. With taxes, cost of living, a small allocation for enjoying life, that $8k a year is a huge amount of money for these kids.

What Robert F. Smith did was free 400 kids from modern slavery that was forced on them by false societal ideals. What they do now with that fresh start is up to them.
 

biophase

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I think it was a good thing. Like anything, some are going to abuse it and buy BMWs now, but there will be a few percent that will go on to do great things because of this. You have to bank on those people.

But, of course, there will be negativity. What about the student who's parents saved for his tuition and has no loans. I bet he wishes he got a student loan now! You just can't win either way.

Thinking about it for a few days, I think a better move would have been to pay for 50% of their loans. That is still a great burden lifted off anyone, but it also still makes them pay back something.
 

Sanj Modha

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Its a great gesture.

If the students don't take it as a blessing and do something worthwhile with it then its on them.
 
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CareCPA

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I've seen a lot of bitter reactions to this. A whole lot of "but I paid my loans, so they should too" and "what about the families that sacrificed and worked 10 jobs to put their kid through college with no loans."

And yet, I only hear those complaints from outsiders. I haven't seen any parent who worked hard to put their kid through Moorehouse complain that other kids had their loans paid off by this guy. I think it's reasonable to believe that they're genuinely happy and grateful for their peers to not be saddled with debt.

I think some context gets lost here. A lot of us have trouble imagining what it's like to be truly poor. We may live paycheck to paycheck, but we're not working 80 hours a week at $8 an hour trying to raise a family*. We hear our peers complain about their student loan debt, and translate those complaints to Moorehouse. But the people I know complaining about student loan debt come from middle class and upper-middle-class families. They're complaining about $50k in student loan debt, while posting Instagram pictures of $100 meals every Friday and Saturday. They aren't in debt because they're poor, they're in debt because they choose to spend their money on dumb stuff, and have no ambition or drive to earn more.

I've also seen a lot of people say that these students will just rack up more debt on dumb crap in the future, but I see no basis for that argument. They didn't build up this student loan debt buying BMWs and whatever other stereotypical stuff you want to attribute to them. They have this debt because they went to an expensive college to try to better themselves and their families. To say that they're just going to go in debt right away for consumer crap is 1) best case scenario - ignorant, or 2) worst case scenario - steeped in baseless stereotypes.

Are we at a point in society where we can't just be thankful that there are generous people out there who want to help others? Or do we always have to complain that it didn't happen to us?
 

Matt Hunt

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When I graduated PA school my student loan debt had ballooned to just shy of $200k (I know, terrible, and if I could do it over again I would take PA school off my list of options at that point in my life!). In the last 3 years and 3 months I've paid off half of it. At my current rate I'll have it paid off in 2 years. So a little over 5 years to knock out $200k of student loan debt. Not bad.

It would have truly been a once in a lifetime blessing to have that debt erased. Even to have what I have left now erased would be a lifetime blessing! I already had the right mindset when I graduated. I knew what I got myself into. I knew the debt would suck. Unlike a lot of my classmates, I didn't go out and buy a new Lexus or Infiniti (and they still had similar, if not the exact same debt, depending whether or not their parents paid for any of it)! Nope, I drove a 2006 Honda Accord for 3 years in Texas heat with NO AIR CONDITIONING! I'd probably still be driving it had this girl not turned left in front of me, resulting in a totaled car (but in the end, that was essentially a free car. WIN!).

So anyway, my point is, I think those who will now take on more stupid debt would've done so anyway. Those who had the mindset to live well below their means and pay the debt off will be smart with their money, save & invest. I'm sure that Mr. Smith realized this before he donated the money. I think it's still a very kind gesture.
 
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ZCP

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So what is everyone doing with graduation announcements you get from friends / family? is @MJ DeMarco paying off any loans?

i've been ..... sending cash if their family is blue collar and they are never able to treat themselves for an accomplishment ...... sending a coupon for me to answer one business question for those w/ business / entrepreneur aspirations ....

what are others doing?
 

G-Man

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I really wanna get to the point where I can be so extravagantly generous to other people that tons of people can armchair quarterback and criticize it.

EDIT: I read an article complaining about how they may get a tax bill, like the tax bill Oprah viewers got when the got free cars. Complaining about things you get for free is officially the height of loserdom.
 

Valhalla

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I think the most dangerous belief about education is that it's a great "investment" so logic would rightly dictate a larger investment would produce larger returns. So if your ROI on a college degree is 10%pa you're much better off spending $250K than $1....

Anyway, I think what Smith did was bring a lot of attention to an issue that desperately needs to be addressed so I'm thankful. I find it hilarious when people entirely miss the point of something so people calling out Oprah on IG because she didn't do the same thing really made me laugh.
 
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Kid

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Free money? History teaches that it equals to one thing - hyperinflation.

But going back on topic. If someone will pay 100% tuition then Colleges will rise them by another,say, 20%. Students will pay 20%, billionaires will pay 100%, Colleges will earn 120%.
Everybody's happy.
:cash::fire:
 

Mattie

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I read about that a few days ago and have decided that I really dislike the move. I think it's going to impress upon those kids that no matter what they do there will be someone or something that will eventually come and bail them out. People need to learn that decisions made have consequences that must be dealt with.

For the record I had a mid-5 figure amount of student loan debt that I paid off on my own through sacrifice and hard work. Financially I would be well ahead if someone came out and just wiped it away, but I think I'm better for having done the work to pay it off on my own.
I'm not really thinking that way, because you have tons of people in Student Loan Debt, and their is Crisis. You may see a lot of people be cut lose of Student Loans or may not. There are a lot of cultures where people don't pay for college like in America. I see on college in our area in Michigan doesn't make students pay in their community, and I say an article today, the students turned it down because they work all day, and need to spend time with their children. So it's kind of thing where the systems may be changing or not.

You really don't know what will happen these days. Giving a free education is something you do in public schools when their younger. What's the difference. You go to school to learn and than get a career.

I personally hope they do make College free, because it is getting kind of useless at this point to be paying for a degree you may never use .

At lease if you give it free your not wasting people's time, money, and giving false expectations. Since it is a business and doesn't really promise you anything. It's an expensive piece of paper.

You have just as many Entrepreneurs who don't have that expensive piece of paper and make tons of money from teaching themselves.

Unless they take the internet down and destroy technology, I don't think you're going to stop people figuring out they can find stuff online. You can even buy your own text books from any university if you desire to do so these days. You don't need the professor, the classroom, or building.
 
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Valhalla

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Didn't think it was possible, but that made less sense than your first comment above.

If you add 20% of the denominator of the previous comment to 120% of the standard deviation of the latter comment, you'll find your answer. Math is so easy. :moneybag::fire:
 
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msufan

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This makes no sense.

Do you seriously equate what this guy did to the Federal Reserve printing money and creating inflation?



Didn't think it was possible, but that made less sense than your first comment above.

I think there's some truth to his comment. Colleges will tend to raise rates to whatever amount they can get; more money flowing into the pot (whether through billionaire giveaways or government subsidies or whatever) tends to increase the amount the colleges can charge.
 
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msufan

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There isn't more money flowing in because this guy paid off a bunch of loans. The colleges were paid for their services at the time the loan the was taken out by the students -- the institutions had their money long before this guy decided to repay the debts.

Fair point.
 

Adelaide

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When I listened to the Billionaire's speech, I was a little concerned. This incredible deed has been done with the notion that the recipients will continue this on. And that other Billionaires should follow suit.

Whilst I appreciate the generosity - I feel he is perpetuating the cycle that this is the road to success. He's talking to impressionable people.

I think the money could have been used more effectively in other ways to help his cause. However, I also think he KNOWS this.
 
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Xeon

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What I'm always amazed about, is people like Robert Smith who made their billions through investing.

HOW??!!

I suspect people who got mega-rich purely through investment are born with the innate talent as much as I hate to admit. You literally need to be right on all the big moves you make in order to reach Smith and Buffet's level.

I can see how people get mega-rich through products, but investment is another ballgame.
 

Roli

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Some really bizarre reactions to a good deed here.

So what if you think that college is a waste of time and part of the problem, the fact is these kids have gone to college, wracked up a debt and now he's paid it off for them.

Some of them will slip straight back into debt, some won't, it doesn't change that it was a F*cking awesome thing to do.

Sheesh louish lighten up people.

Hope the Chimp Paradox wins the book discussion, a lot of chimps screaming on this thread right now! :rofl::rofl::rofl:
 

Roli

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I suspect people who got mega-rich purely through investment are born with the innate talent

Nobody is born with an innate talent to invest...
 
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Roli

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Another reason I think this is a great thing to do, is because of the effect of seeing someone like yourself do something and that spurring you onto do it to.

I'm re-reading Cialdini's Influence at the moment and he talks of children scared of dogs being shown kids the same age as them playing happily with puppies.

The research found that the more like the kids they were watching, the more likely the kid would lose the fear of dogs, and the effect was long lasting. He also cites a few other examples which show that seeing someone like yourself spurs you onto achieve the same thing.

I checked out Moorehouse and saw that it is traditionally a college for young black men, so it is good for them to see a black billionaire doing such an amazing thing, when usually they are surrounded by negative stereotypes of black men.

I'm sure that this will have a big impact on them, and I wouldn't be surprised if more billionaires spring from this group.

Well done Robert Smith!
 

Kid

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I extrapolated what this guy did.

It is in a sense like:
"what would happen if every student in a nation got bailout (their education or their loan paid for free)?"

Do you seriously equate what this guy did to the Federal Reserve printing money and creating inflation?

I'm 60% serious.
And here' the reason.
Countries that offer higher education for free, moved job markets to the extremes.

I B.S. you not, but there ware job listings that required Bachelor's degree for room cleaning job.

That's why i compared it to hyperinflation.
Things start to devalue fast if you give'em away for free in huge quantities.


I think there's some truth to his comment. Colleges will tend to raise rates to whatever amount they can get; more money flowing into the pot (whether through billionaire giveaways or government subsidies or whatever) tends to increase the amount the colleges can charge.

TY, @msufan. That's the point.

Both extremes: having $200K of debt or having worthless piece of paper for free are wrong.

The only ones who benefits from this are Higher Education Con Arti... i mean ...Institutions. And they do it at the expense of their own students.
 

HECommerce

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Reminds me this guy.
 
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Kid

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First, i'd like to thank you for reply and i'd like to mention that i don't write here to disrespect anyone's opinion or point of view.

I think you misunderstand what happened here. Nothing was given away for free. It was just paid for by someone else. No different than if the kids' parents paid for the schooling. Or if the kids had their employers pay for the schooling

Its true. And there is slight difference. We as entrepreneurs know that there is no free meal. In other words that in the end someone has to pay.

The perception of students, although, of being given money by non-related person might be more of a "free meal" rather then "my parent paid, i at least have to try find a job i was educated to do."



A very large percentage of the time, college is not paid for by the students themselves -- it's paid for by a parent, an employer, the government or the institution itself. Yet, I don't see you expressing concern over that impacting inflation and job markets.

You got point here. It would be nice to have some statistical data. Maybe ubiquity of student debt is more of a urban legend then a fact.


Based on this comment, it seems to me that you're overlaying your personal view of college onto the situation and aren't being objective about what happened and the impact it's likely to have.

I think we have some misunderstanding here.

My post was an attempt to foresee what would happen if such behavior would be a common thing. It isn't, now.

I believe that we can't judge this situation without a context.
This bailout wasn't made 20 years ago.
It was made when some politicians consider free higher education as a real option.

In my opinion tl;dr is- schools make money, students (or their parents) get in debt and the alternative (free schools) aren't a solution either.
 

biophase

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I extrapolated what this guy did.
Things start to devalue fast if you give'em away for free in huge quantities.

They still have to go to school for 4 years and get decent grades.

You are acting as if, this guy came in and paid $100,000 and bought a degree and gave it to a kid.

It's not free. I don't understand your point at all.

I think this would be different if he paid for all the freshman's this year's tuition before school started. Then these kids are given free college which they may not value as highly.

But instead, he paid only for the kids that have graduated. These kids worked hard and got their degree with the expectation of paying their loans in the future. They weren't given a free ride at all.
 
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