Student Loan Changes Are Crippling HBCUs

By Lezli Baskerville Contributing Columnist | 6/7/2013, 10:22 a.m.
With smaller endowments, most HBCUs were ill equipped to offer families funds they were expecting from the PLUS Loan.

This week, the Department of Education hosted a field hearing on the campus of Spelman College to probe issues impacting higher education. The shift in the Department’s interpretation of regulations controlling the Parent PLUS Loan (PPL) program that resulted in HBCUs loosing 28,000 students and $50 million is foremost on the minds of HBCU stakeholders.

The Department of Education shifted its regulatory interpretation to align the PPL program with today’s commercial loan industry standards. There is no suggestion that the program was abused, had disproportionately high default rates, or lost funds. The program was working and therefore did not need to be “fixed”.

The PLUS Loan Program provides loans to graduate and professional students, and parents of undergraduate students, who do not have an “adverse credit history,” as determined by Department of Education regulations. In October 2011, the Department applied a new, more rigid definition of adverse credit history for which it is now seeking public comment.

The new PLUS Loan eligibility criteria are applicable to all applicants, but

disproportionate percentages of HBCUs and students attending HBCUs were adversely impacted by the regulatory shift because HBCUs and the majority of families they serve have fewer financial resources.

HBCUs have one eighth of the average size of endowments for historically white institutions of higher learning. Despite the smaller endowments, HBCUs graduate the majority of America’s black professionals: 85 percent of doctors, 80 percent of federal judges, more than 60 percent of engineers, scientific and technological professionals, and 50 percent of pre-kindergarten through 12th grade teachers.

With smaller endowments, most HBCUs were ill equipped to offer families funds they were expecting from the PLUS Loan.

The shift to a more rigid interpretation of creditworthiness occurred as many HBCU student families are finding the post-Great Recession economic recovery elusive. Official African American unemployment hovers near 14%. Many HBCU parents witnessed their wealth decline by 53% (compared with 13% for whites). This coupled with the bursting of the housing bubble, subprime mortgage lending, and the disproportionate numbers of African Americans who lost their homes also wreaked havoc on HBCU/PBI parents.

The PPL regulatory shift occurred concurrent with four other resource losses resulting in a quintuple whammy: In adjusting an error it made in calculating the base federal funding award to HBCUs, the Department of Education reduced the award by as much as $250,000; the Summer Pell Grant program that enabled low-income students to attend college year-around was eliminated; the number of months a student could receive a Pell Grant award was reduced from 18 to 12 months, and at the same time, the family income below which a student could receive the maximum award was reduced from $32,000 to $27,000. And the interest rate on federal student loans is set to double unless Congress acts immediately.

The cumulative impact of the aforementioned has been nothing short of catastrophic. The Department must reverse the new PPL regulatory stance and put in place regulations that promote access, success, and protect public dollars.

The National Association For Equal Opportunity in Higher Education (NAFEO), the trade association of all HBCUs and PBIs, stands ready to assist.

Lezli Baskerville is President and CEO of Washington, D.C.-based NAFEO.