I took the line in the song as irony. At the time the singers could use a line like that in the North and perhaps in border states such as Tennessee, but even as late as the 1940's it would have been considered insufferable cheek in the rural Georgia I knew at the time. damnyankee (never given caps) was still the most damning of epithets.

Remember that the 1880's were still in Reconstruction times. Hated scaliwags and carpetbaggers abounded; it was the Blacks who were punished because the White carpetbaggers had the force of the damnyankee government behind them and Blacks were the easy target.

I think that the "Nashville Students" also were from Fisk, like the Jubilee Singers whom they apparently copied. Two of the songs in their repertory were "Steal Away" and "March On," using the exact words of the Jubilee Singers.
The President of Fisk University, in a preface to "The Story of the Jubilee Singers," 1880, wrote "The most of the students are dependent upon themselves, and most earn their own support while securing their education." At the time, the expenses of Fisk were met by the American Missionary Association. It seems likely that other students at Fisk tried to copy the success of the Jubilee Singers in order to pay their living expenses.

(In this thread I have used 'Black' in preference to 'colored' which was the accepted word at the time (e. g., used by the president of Fisk in the preface above). I have hesitated to use African-American since the term was unknown at the time and seems anachronistic when used in discussions of the 19th c.