By Lesley Green-Rennis
- Robert F. Smith’s SFI includes an income contingent financing alternative that allows students to borrow up to $20K per year
- 86.6% of Black students take out federal loans to attend four-year colleges
President-elect Joe Biden plans to cancel a minimum of $10,000 for student borrowers, as this debt crisis has disproportionately impacted Black borrowers, saddling them with the most student loan debt. However, Robert F. Smith, America’s wealthiest Black man, isn’t waiting on the federal government to address the debt crisis among Black graduates. He’s pledged to reduce student debt, particularly at historically Black colleges and universities (HBCUs) where students graduate with 32% more debt than their peers through his Student Freedom Initiative (SFI).
Why This Matters: Did you know that 86.6% of Black students take out federal loans to attend four-year colleges? Not to mention that a higher percentage of HBCU undergraduates finance their education with federal Parent PLUS Loans than non-HBCU students (10% vs. 6%). Parent Plus loans are particularly problematic because they have higher interest rates, are not linked to income-based repayment, and tend to leave older borrowers paying well into their retirement years. With the cost of college climbing 8x faster than American wages and the inflation rate an income based alternative student loan plan is desperately needed.
Participating students pay back a portion of their income for up to 20 years after graduation
Smith’s SFI includes an income contingent financing alternative that allows students to borrow up to $20,000 per year after they’ve exhausted federal subsidized and unsubsidized loans, grants, and other scholarships offered by their colleges. Participating students pay back a portion of their income for up to 20 years after graduation. All repayments go back into the SFI fund to support future students, making the initiative self-sufficient.
What’s Next: The debt crisis among Black student loan borrowers has persisted in spite of federal policy makers attempts to create loan repayment options. Smith’s SFI plan may be a viable alternative for Black families who have traditionally turned to high interest, fixed-payment, private or Parent PLUS loans. There are major supporters involved in this initiative including Smith’s charitable organization, Fund II Foundation, all with plans to support 5,000 new students every year. Eventually SFI will expand to all HBCUs and other minority-serving institutions. According to Smith, “…it’s important that we do these things at scale and en masse because that’s how you lift up entire communities.”
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