Billionaire Robert F. Smith became a hero to hundreds of Morehouse College graduates on Sunday when he announced he was going to pay off all of their student loan debt. He could also become a hero to future social science researchers studying the effects of student loans.
As student loan debt has accumulated due to soaring tuition, there have been a lot of studies indicating how the enormous obligations from those entering the workforce are dramatically altering younger Americans’ lives and finances. Existing studies have indicated that the presence of student debt have made millennials delay major life decisions like getting married and buying houses, which in turn has contributed to their lower wealth relative to prior generations at the same age, and their difficulty in preparing for retirement.
Such studies obviously have a lot of variables, however, especially because those with lower or higher student debt may have certain characteristics (in terms of race, wealth, or family background) that may also be influencing their behavior.
However, the Morehouse gift will provide researchers with a much more controlled experiment. Years down the road, researchers could survey Morehouse students who graduated without student debt in the few years leading up to the gift, and then see how they compare to those who graduated in 2019. In this case, there will be a group of graduates who would have had a similar income and racial makeup prior to entrance into college and who would have the same educational backgrounds when exiting.
Do the 2019 graduates get married, have kids, and purchase houses earlier than prior classes? Do they have more retirement savings 10 years down the road? Are they more likely to pursue “fun” careers in which they follow their hearts as opposed to practical office jobs that pay more? These questions and many more could be perused in the coming years.
So, in addition to the euphoria Smith brought to the students who now will be graduating debt free, he could also provide a rare opportunity to have a pretty controlled look at the impact of student loans on the generations that have been graduating in the era of massive debt.
