Down Debt

Philanthropists cause a stir as they pay off student loans, but few push for debt cancellation

This week, the Otis College of Art and Design in Los Angeles received its largest donation ever from a pair of glitzy donors. Seemingly inspired by classes he took in school as a teenager, Snapchat co-founder Evan Spiegel, once the world’s youngest billionaire, and model and entrepreneur Miranda Kerr gave a gift in school somewhere north of 10 million.

The couple’s gift caused a stir – it’s meant to pay off student debt incurred by every graduate of Otis’ class of 2022.

Once almost unheard of, student loan repayment for lucky graduates is gaining traction among some higher education donors. The best-known example is billionaire investor Robert F. Smith, who doled out around $40 million in 2019 to cover Morehouse College graduate debt and provided additional funding to ease the debt burden of others. HBCU students.

Whenever this happens – and it’s still rare – it tends to cause a stir, perhaps rightly so. Yet there is little at a structural level that distinguishes graduate student debt repayment from its much more common philanthropic cousins ​​– commitments for scholarships and financial aid. It’s just that it happens at the end of the students’ college years rather than at the beginning. In that sense, it’s probably less beneficial, given the anxiety and fear associated with racking up huge debts while trying to complete a degree.

Also consider how few students actually benefit. In Spiegel and Kerr’s case, Otis College’s Class of 2022 had just 285 students. In Smith’s case, Morehouse’s 2019 class had about 400 students. Do not mistake yourself; the cancellation of the debt of a certain number of students has a great significance for the young people concerned. But that’s less than a drop in the ocean next to the staggering burden of total student debt in the United States, estimated at nearly 45 million borrowers and totaling more than $1.7 trillion. .

Following campaign promises to reverse at least some of that staggering sum, the Biden administration has simply opted to continue extending (and extending and extending) the pause on federal student loan payments instituted at the start of COVID. The most recent such extension pushed the end date back to August, but the medium-term political outlook all but guarantees that the date will be pushed back again. Meanwhile, the debate continues: should we cancel the debt, and if so, how much and for whom?

Positions on these issues vary. But for funders who support student debt forgiveness, it seems likely that $10 million (or $40 million) to tip the balance of federal action would be a far more effective use of philanthropic dollars. as unique graduation gifts, potentially benefiting millions of borrowers. instead of a few hundred. So why aren’t we seeing more advocacy funding for student debt cancellation in the otherwise crowded world of higher education philanthropy?

who is support advocacy?

Well, on the one hand, it would be inaccurate to say that the finance world is completely devoid of resources for student loan defense. There is a modest constellation of nonprofit organizations that lobby for the cancellation of federal student loans and advocate on behalf of student borrowers. Their funders include progressive-leaning foundations as well as several giving vehicles with living donors at the helm.

One example is the Student Loan Protection Center. It got its start in 2018 when Seth Frotman, student loans ombudsman at the Consumer Financial Protection Bureau, resigned in protest amid Trump-era efforts to undermine the agency. Frotman and a few colleagues then launched the advocacy group Resources Legacy Fund, a tax sponsor that otherwise tends to focus on environmental projects. The center has secured initial support from the Sandler Foundation, as well as additional support from Arnold Ventures, to the tune of nearly $4 million.

The Sandler Foundation, a progressive advocacy heavyweight founded by the late Herb and Marion Sandler, has also funded another group active in this space, the Center for Responsible Lending. Although the center’s advocacy work is not limited to student loans, its research and recommendations often support the large-scale cancellation of student loans as a path to a more racially equitable and sustainable economy, themes often voiced as well. by other cancellation advocates. Besides Sandler, who started it, the Center for Responsible Lending counts progressive foundations like Ford, OSF and Oak among its supporters.

The National Consumer Law Center is another think tank advocating for student loan forgiveness and relief. Many of its major backers are associated with living donors, including Arnold Ventures, the JPB Foundation, and the Heising-Simons Foundation.

A few other notable advocacy groups pushing for student loan forgiveness include the Student Debt Crisis Center, a 501(c)(4) group founded in 2012, which says it is “in the process of applying” for status. 501(c)(3). . Young Invincibles’ extensive youth advocacy work draws funding from a variety of sources, including Gates, Robert Wood Johnson, and the California Endowment (though not necessarily for the specific purpose of advocating for student loans; Young Invincibles does a lot of work on Health care) .

Finally, the Debt Collective is a syndicate of debtors founded in the wake of Occupy Wall Street which also advocates for an end to student debt. It seeks to become a union in the traditional sense, funded by membership dues, but for now it is a project funded by the 501(c)(3) Sustainable Markets Foundation. Philanthropic funders include progressive funders like Ford, OSF, Rockefeller Brothers Fund and Nathan Cummings.

Upstream and downstream

Although many of these advocacy groups have been pushing for forms of student debt forgiveness for some time, they are small fry next to the massive student loan industry complex. They are also off the radar for most higher education funders and tend to rely on the support of a small group of supporters. As mentioned, some are still in various stages of fiscal sponsorship.

In total, their annual spending on student debt-specific advocacy undoubtedly compares unfavorably to Spiegel and Kerr’s gift of more than $10 million, not to mention Smith’s $40 million and more. And yet, their potential beneficiary pool numbers 45 million, while college- and class-specific donations tend to benefit only a few hundred.

This is a scenario we often see when it comes to economic justice and anti-poverty funding. On the one hand, there is a lot of funding for downstream assistance, such as scholarships, financial aid and debt repayment for graduating seniors. But far less support tends to be given to upstream interventions in the area of ​​fiscal policy, such as pushing the federal government to cancel debt. To have a real and lasting impact, both are necessary.

In the area of ​​student loans, this disparity could be related to the reluctance of specific lenders to the notion of large-scale forgiveness, even among lenders from the advocacy groups above. Arnold Ventures, for example, has been reluctant to support cancellation for all borrowers, instead advocating a more targeted approach. Questions also remain about the legal feasibility of canceling student debt by federal executive order — though most supporters argue Biden should go ahead.

Ultimately, probably the greatest impediment to philanthropic support for student loan advocacy is philanthropy itself — or, more accurately, philanthropy’s longstanding discomfort with advocacy of all kinds. This discomfort should not evaporate anytime soon. But in an area of ​​need as vast as student debt in the United States, even a modest influx of new advocacy funds could yield outsized gains.