Wall Street trading firm gifts $10 million to nonprofit fund for HBCU students

Wall Street trading firm gifts $10 million to nonprofit fund for HBCU students

Black billionaire Robert Smith leads effort to push HBCU students toward debt-free careers in financial services and STEM-related professions

BCN Executive Editor Wesley Brown — Sept. 25, 2021 — The Student Freedom Initiative (SFI), the nonprofit fund led by Black billionaire Robert Smith to push HBCU students toward debt-free careers in financial services and STEM-related professions, recently announced a $10 million gift from members of New York City-based Jane Street.

The one-time gift from the Wall Street financial and commodities and futures trading platform, will support Student Freedom’s Income Contingent Agreements (ICAs), an alternative financial mechanism used to allow students pursuing degrees in science, technology, engineering, and mathematics (STEM) at Historically Black Colleges and Universities (HBCUs) to graduate free of burdensome student loan debt.

Jane Street, which has offices in New York City, Amsterdam, London and Hong Kong, will also offer engaging educational opportunities to HBCU students who are interested in exploring careers in financial services. The contribution from the members of Jane Street will go towards funding higher education in perpetuity through ICAs.

“The Student Freedom Initiative is grateful for this gift as it is a major investment in Black STEM students,” said Smith, chairman of CFI and founder, chairman and CEO of off-Wall Street venture capital firm Vista Equity Partners. “This gift is a vote of confidence not just in our program at the Student Freedom Initiative, but also in the potential these young students carry to change the face of STEM and make their mark on our communities. We are hopeful this gift will not only inspire students to pursue a STEM education, but also help equip them with the tools they need to start their careers.”

Inspired by a 2019 gift by Smith to Morehouse College graduates, the Student Freedom fund aims to alleviate long standing financial burdens Black students face, disproportionate to their white counterparts. In a story that quickly became viral on social media and made Smith a household name, the Black billionaire and former Morehouse graduate promised to pay off the debt of the nearly 400 members of his alma mater’s 2019 graduating class through an endowed gift worth $40 million.

On average, according to data from the New York Federal Reserve, Black students who graduate with bachelor’s degrees accrue $7,400 more in debt than their white peers. This gap only widens across the gender divide, with Black women carrying 20% more student debt than white women, owing an estimated $41,466 in undergraduate loans compared to the $33,851 white women owe. By addressing the unequal burden faced by these students, the Smith-led initiative seeks to combat the racial wealth gap and provide the next generation of Black thinkers the ability to create generational wealth and achieve social mobility.

Students utilizing ICAs or other income share instruments can fund their educational pursuits through an investor in return for a contract to pay a specified percentage of income for a fixed number of years after graduation. Repayment through ICAs is tied to a student’s income — meaning a student is not required to pay whenever they are not working, earning below the poverty level, or in graduate school, and payments will never exceed a fixed percentage of a student’s income.

Jane Street said it also extended their FOCUS program to up to 150 HBCU students per academic year, providing enriching Wall Street experiences at the firm’s New York City office to students interested in careers at the intersection of technology and finance with roles that could span trading, software engineering, and business development. Jane Street’s gift is also the first received by SFI from members of a global financial services firm.

“We are proud to partner with the Student Freedom Initiative to address the student debt crisis,” said Matt Berger, partner at Jane Street. “College tuition places an enormous financial burden on students and perpetuates an uneven playing field. With this grant, we hope to help reduce the financial risk so that talented students of all backgrounds have the opportunity to pursue careers in STEM fields.”

Mark Brown, SFI’s executive director, said Jane Street’s $10 million gift is the first major contribution from an outside firm to support financing for students through the nonprofit’s income sharing that allows students to receive funding for higher education while they’re in school and pay it off after they graduate. Citing a recent McKinsey & Company report (here), Brown said the proportion of people of color working in the financial services industry drops 75% from entry-level positions to senior level C-suite positions.

“Pairing college accessibility with immersive experiences are important stepping stones to diversity in financial services,” he said. “We hope that other firms will join the effort to ensure that talented, underrepresented students are reflected in today’s workforce — this will also help reduce employees’ feelings of exclusion and being the ‘ONLY’ as summarized in this McKinsey report.”

Launched in March 2020, SFI was founded with the mission of ensuring freedom in professional and life choices for students attending Minority Serving Institutions (MSIs) and HBCUs. In October 2020, Robert F. Smith personally donated $50 million as seed funding to expand SFI’s work. To date, Washington, D.C.-based nonprofit has received over $100 million in pledges, including generous contributions from Fund 2 Foundation, Cisco and the Bentonville-based Walmart Foundation.

Robert Smith, nation’s wealthiest Black person, is leading efforts to help HBCU students pay off student loan debt and gain entrance into financial services industry and high-paying STEM-related jobs.

In early February, the Walmart’s philanthropic arm promised a large donation to SFI in the first rounds of grants that the Arkansas foundation has pledge to contribute more than $100 million over five years through the Walmart.org’s Center for Racial Equity to help address racial disparities in the U.S. in June 2020.

In late August, SFI announced their official launch for the fall 2021 semester of the initiative’s initial cohort of nine HBCUs, dispersing funds through ICAs to eligible applicants at initial participating schools. That HBCUs included Claflin University, Clark Atlanta University, Florida A&M University, Hampton University, Morehouse College, Prairie View A&M University, Tougaloo College, Tuskegee University, and Xavier University of Louisiana.

Smith is also involved in other similar ventures aimed at closing the educational funding gap and build on his legacy of philanthropic funding that targets projects and educational platforms that uplift Black communities across the South and other underserved urban areas.  In mid-August, New York City-based nonprofit DonorsChoose announced that Smith and his Vista Equity Partners and publicly traded PowerSchool had fulfilled over 1,500 teacher funding requests for classroom supplies at over 650 schools where more than 50% of the student population is African American.

The donation, worth over $1.25 million, will support teachers in predominantly Black schools in and around Atlanta, Birmingham, Charlotte, Houston, Memphis, and New Orleans – communities that are home to half of all Black people in the country. According to DonorChoose, the funding addresses inequities in areas that are home to half of all Black people in the country: Atlanta, Birmingham, Charlotte, Houston, Memphis, New Orleans, plus a 100-mile radius around each city.

Vista is also the primary financial backer for PowerSchool, a California-based technology firm that provides online and cloud-based software for K-12. In late July, PowerSchool completed a Vista-led initial public offering (IPO) of more than 39.5 million shares that raised proceeds of more than $711 million. Vista first acquired PowerSchool in 2015 from British education publishing conglomerate Pearson Plc for a tidy sum of $350 million.

Smith has also continued his success in build Visto into one of the nation’s leading middle market and large-cap private equity firms with offices in Austin, Chicago, New York City, Oakland, and San Francisco. To date, Vista has invested $75 billion in more than 70 companies in the software, data and technology space. Since Vista’s founding in 2000, Smith has overseen more than 380 completed transactions by the firm representing over $120 billion in transaction value.

One of Vista’s other portfolio firms, Datto Holding Corp. Inc., also completed an initial public offering (IPO) of 22 million shares at a price of $27 per share on the New York Stock Exchange in late October. At a closing price of $28.16 on Friday (June 25), Datto now has a market cap of more than $4.5 billion. Vista acquired the Norwalk, Conn.-based cybersecurity firm in 2017.

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