Australia markets closed

Billionaire pays off 400 students' university debt

ATLANTA, GEORGIA - MAY 19: Robert F. Smith gives the commencement address during the Morehouse College 135th Commencement at Morehouse College on May 19, 2019 in Atlanta, Georgia. (Photo by Marcus Ingram/Getty Images)

University graduation is always a great day – you’ve achieved a major qualification and the world outside awaits.

There’s really only one thing that could make graduation better: graduating debt-free, as students at US' historically all-male black college, Morehouse College, may tell you this week.

Billionaire technology investor and prominent philanthropist Robert F. Smith stunned students at a graduation ceremony this week by pledging to pay off all their student loans – around US$40 million altogether for the 400 students.

Around three quarters of students use federal loans at Morehouse, and the issue of student debt is a frequent topic during commencement addresses.

"On behalf of the eight generations of my family that have been in this country, we're gonna put a little fuel in your bus," Smith told the graduates on Sunday.

"This is my class, 2019. And my family is making a grant to eliminate their student loans."

And while students and teachers wept and cheered, commentators on Twitter considered the broader questions around student debt in the US.

What does this say about student debt in America?

“If you are applauding Robert F. Smith's incredibly generous decision to pay off Morehouse College's graduating class student debt, imagine what Elizabeth Warren's debt student loan debt forgiveness plan could accomplish,” Helaine Olen said.

Others questioned whether such substantial funds should be funnelled through the hands of billionaires, and instead allocated by the public purse.

“I LOVE what Robert F. Smith has done but know this truth: If billionaires today were taxed at the 1940s-1970s rate when USA had its strongest middle class growth in history—Robert F. Smith wouldn’t have needed to pay for this student debt b/c college would ALREADY be affordable,” Qasim Rashid said.

New York congresswoman Alexandria Ocasio-Cortez had a similar opinion.

“It’s important to note that people shouldn’t be in a situation where they depend on a stranger’s enormous act of charity for this kind of liberation to begin with (aka college should be affordable), but it is an incredible act of community investment in this system as it is,” she said.

Former US President, Barack Obama also applauded the move.

“Here’s a great story: While we’ve still got a lot of work to do to make college affordable for everyone, that didn’t stop Robert F. Smith from seizing an opportunity to make a difference. He’s erasing the student loan debt for this year’s Morehouse grads.”

F. Smith founded private equity firm Vista Equity Partners in 2000 and has a personal net worth of US$5 billion.

Make your money work with Yahoo Finance’s daily newsletter. Sign uphere and stay on top of the latest money, news and tech news.