Giving You Access to Your Lives - The Robert Smith Impact

Good Morning,

Last weekend the Venture Capitalist/Billionaire Robert Smith set the world on fire by paying off the debt of the 2019 graduating class of Morehouse. During an online conversation with Rendel Solomon, we vaguely discussed the economic impact of this move, but outside of the financial impact he also changes the thought process for how people will view this action. Usually, I highlight a couple of main points from an article, but this entry will be slightly different. I will touch upon the financial and behavioral impact that this move has on the masses.

1. The economic impact is easy to assess which is where I will start. Based on the approximate average monthly loan payment of $300 a month (based on a study produced by Studentloanhero.com on 2/4/2019), Mr. Smith puts that money back into the graduate’s pocket, but it gets more complex. If these students contribute these savings to their company 401-k or a basic IRA/Roth IRA account, they receive the following benefits:
a. Based on a 10-year repayment plan at 300 a month with a conservative rate of return of 4% a year, these graduates will be able to save $44.1K during this time and if they never add another dime until retirement this number compounds to $2174k
b. Using the same assumptions as above, if their company matches that first 3% the number these graduates should accumulate close to $66K in 10 years and retire with about $261k

2. By not having any college debt, Robert Smith allows these students to be able to assume more career risk because the graduates are not burdened by excessive debt. The ability to assume more risk provides the opportunity for them to have a higher potential on the income possibilities because they are not forced nor bound by impending liabilities

3. In his speech, he urged the graduates to pass the gift along which includes gifting to their university so future classes behind them can benefit from his act of generosity

4. With his gift, he changes the perception of both finance professionals who are not known as being benevolent along with his company Vista Equity. Most individuals reading this article wouldn’t know it, but despite his firm having phenomenal returns his Assets Under Management does not reflect his success

With society putting an increasing emphasis on social good, Robert Smith has put his money where his mouth is and raised the awareness of a critical issue of how educational debt limits the opportunities of our youth. High debt loads play a significant factor within the increasing income inequality that is felt throughout the United States, which has been a topic discussed in the past by numerous individuals and remains the burden which is squeezing the middle class out of existence. While I know that others with this type of means will not match his gift, his bold act has shown everyone why he has transcended all to be in the position he is today. Hopefully, his gift not only helps the 2019 graduating class of Morehouse but inspires others the duty that we all must help out those behind us have better lives.

I would be remised if I did not thank Rendel Solomon whom the founder of One Stock One Future for posing the question which created this blog post. The mission of his Not-For-Profit is: “To plant sees of wealth across the country by turning underprivileged and economically disadvantaged youth into public company shareholders.” For those interested, please visit www.onestockonefuture.org for more information.

Links:

https://www.nytimes.com/2019/05/22/us/robert-smith-morehouse-college-student-loan-debt.html

https://www.nbcnews.com/nightly-news/video/billionaire-philanthropist-robert-smith-s-gift-to- morehouse-grads-no-student-debt-59947589770

https://www.marketwatch.com/story/why-robert-f-smiths-pledge-to-pay-off-morehouse-loans-is-a- turning-point-for-colleges-and-the-billionaires-that-support-them-2019-05-22

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