Philanthropists Make a Splash Paying off Student Loans, but Few Are Pushing for Debt Cancellation

This week, L.A.’s Otis College of Art and Design got its largest-ever donation from a glitzy pair of donors. Apparently inspired by classes he took at the school as a teenager, Snapchat co-founder Evan Spiegel, once the world’s youngest billionaire, along with model and entrepreneur Miranda Kerr, gave the school a gift somewhere north of $10 million.

The couple’s gift made something of a splash — it’s earmarked to pay off the student debt incurred by every graduate in Otis’ class of 2022.

Once all but unheard-of, paying off lucky graduates’ student loans is gaining traction among some higher ed donors. The most well-known example is billionaire investor Robert F. Smith, who doled out around $40 million in 2019 to cover the debt of Morehouse College’s graduating seniors and extended additional funding to relieve the debt burden of other HBCU students.

Whenever this happens — and it’s still rare — it tends to draw great fanfare, perhaps justifiably. Still, there isn’t much on the structural level that distinguishes paying off graduates’ student debt from its far-more-common philanthropic cousins — commitments for scholarships and financial aid. It’s just that it happens at the tail end of students’ college years rather than up front. In that sense, it’s probably less beneficial, given the anxiety and fear associated with racking up huge amounts of debt while trying to finish a degree.

Consider, also, how few students actually benefit. In Spiegel and Kerr’s case, Otis College’s graduating class of 2022 numbered just 285 students. In Smith’s case, Morehouse’s 2019 class numbered around 400 students. Don’t get me wrong; canceling the debt of any number of students has great meaning for the young people involved. But it’s less than a drop in the bucket next to the mind-boggling total student debt burden in the U.S., estimated to span nearly 45 million borrowers and add up to over $1.7 trillion.

Following campaign promises to cancel at least part of that staggering sum, the Biden administration has chosen simply to keep extending (and extending, and extending) the pause on federal student loan payments instituted at the onset of COVID. The most recent such extension pushed the end date to August, but midterm political optics all but guarantee the date will be pushed again. Meanwhile, the debate continues — should debt be canceled, and if so, how much, and for whom?

Positions on those questions vary. But for funders who do back student debt cancellation, it seems likely that $10 million (or $40 million) to tilt the scale on federal action would be a far more effective use of philanthropic dollars than one-off graduation gifts, potentially benefiting millions of borrowers instead of just a few hundred. So why don’t we see more advocacy funding for student debt cancellation in the otherwise crowded world of higher ed philanthropy?

Who is backing advocacy?

Well, for one thing, it would be inaccurate to say the funding world is completely bereft of resources for student loan advocacy. There is a modest constellation of nonprofit organizations pushing for federal student loan cancellation and advocating on behalf of student borrowers. Their funders include progressive-leaning foundations as well as several giving vehicles with living donors at the helm.

The Student Borrower Protection Center is one example. It got its start in 2018 when Seth Frotman, student loan ombudsman at the Consumer Financial Protection Bureau, stepped down in protest amid Trump-era efforts to undermine the agency. Frotman and a few colleagues went on to launch the advocacy group at the Resources Legacy Fund, a fiscal sponsor that otherwise tends to focus on environmental projects. The center 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, also bankrolled another group active in this space, the Center for Responsible Lending. While the center’s advocacy work isn’t limited to student loans, its research and recommendations often support broad-based student loan cancellation as a path toward a more racially equitable and durable economy, themes often expressed by other cancellation advocates, as well. Besides Sandler, which got it off the ground, the Center for Responsible Lending counts progressive foundations like Ford, OSF and Oak as supporters.

The National Consumer Law Center is another think tank-y advocacy shop making a case for student loan cancellation and relief. Many of its major funders 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 cancellation include the Student Debt Crisis Center, a 501(c)(4) group founded in 2012, which says it is “in the application process” for 501(c)(3) status. Young Invincibles’ wide-ranging 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 student loan advocacy; Young Invincibles does a lot of work on healthcare).

Finally, the Debt Collective is a debtors’ union founded in the wake of Occupy Wall Street that’s also advocating for an end to student debt. It’s seeking to become a union in the traditional sense, funded by member dues, but right now, it’s a fiscally sponsored project of the 501(c)(3) Sustainable Markets Foundation. Philanthropic funders include progressive grantmakers 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 cancellation for a while, they’re small fry next to the massive student loan industrial complex. They’re also off the radar for most higher ed funders and tend to rely on backing from a small cadre of supporters. As mentioned, some are still in various stages of fiscal sponsorship.

Altogether, their yearly outlay for student-debt-specific advocacy no doubt compares unfavorably with Spiegel and Kerr’s gift of $10 million-plus, let alone Smith’s $40 million-plus. And yet their potential pool of beneficiaries numbers 45 million, while college-and-class-specific gifts only tend to benefit a few hundred.

It’s a scenario we see a lot when it comes to economic justice and anti-poverty funding. On one hand, there’s funding aplenty for downstream aid, like scholarships, financial aid and paying off graduating seniors’ debt. But much less support tends to be forthcoming for upstream interventions in the realm of fiscal policy, like pushing the federal government to cancel debt. To make a real, lasting impact, both are necessary.

In the student loan arena, that disparity could have to do with specific funders’ reticence around the notion of broad-based cancellation, even among backers of the advocacy groups above. Arnold Ventures, for instance, has been reluctant to support cancellation for all borrowers, instead advocating a more targeted approach. Questions also remain about the legal feasibility of student debt cancellation by federal fiat — though most advocates argue Biden should forge ahead.

In the end, the biggest barrier to philanthropic support for student loan advocacy is probably philanthropy itself — or, more precisely, philanthropy’s long-standing discomfort with advocacy of all sorts. That discomfort isn’t likely to evaporate anytime soon. But in a field of need as vast as that of student debt in the U.S., even a modest influx of new advocacy funding could yield outsized gains.

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