Billionaire investor Robert Smith surprised graduating students at Morehouse College in Atlanta, Georgia, by using his commencement speech to pledge to pay off the student loan debt of the entire class of 2019.

Key points: Robert Smith founded a private equity firm and is America's richest black man

Robert Smith founded a private equity firm and is America's richest black man He is a longtime philanthropist who supports causes including education and the arts

He is a longtime philanthropist who supports causes including education and the arts Wiping the debt of 396 Morehouse College students will cost US$40 million

Video footage of Mr Smith's remarks show the announcement was met with shock, as people's mouths fell agape, before students started cheering and the crowd gave him a standing ovation.

"On behalf of the eight generations of my family who have been in this country, we're going to put a little fuel in your bus," he said.

"This is my class, 2019, and my family is making a grant to eliminate their student loans," Mr Smith added, gesturing toward hundreds of students dressed in black robes and mortarboards.

"Now I know my class will make sure they pay this forward.

"I want my class to look at these [alumni] — these beautiful Morehouse brothers — and let's make sure every class has the same opportunity going forward, because we are enough to take care of our own community."

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Morehouse is a historically black college, one of more than 100 schools founded to serve African-American students, mostly in the US South, before the 1964 Civil Rights Act outlawed school segregation.

Mr Smith, the founder and chief executive of the private equity firm Vista Equity Partners, also received an honorary degree at the ceremony on Sunday.

The wealthiest black man in the United States, he is worth an estimated $US5 billion ($7.25 billion), according to Forbes magazine, and is a longtime philanthropist.

He pledged to donate $50 million to his alma mater, Cornell University, in 2016 and gave $20 million to the National Museum of African American History in the same year, according to Forbes.

Morehouse president David Thomas told CNN that wiping the debt of the 396 students would cost about $40 million.

"When you have to service debt, the choices about what you can go do in the world are constrained," he told CNN.

"[Mr Smith's gift] gives them the liberty to follow their dreams, their passions."

Reuters/ABC