Education — 31 March 2013
Will New Student Loan Requirements Hurt HBCUs?

By Ronald W. Weathersby

Historically Black Colleges and Universities (HBCU) are seemingly at risk with the high rate of presidential turnovers and now they’re facing another challenge as a result of stiffer student loan requirements.

The U.S. Department of Education made changes to the federal PLUS loan program in an effort to make sure government loans line up with industry standards to decrease the rate at which students default on the loans. The new requirements have hit HBCUs hard since more of their students come from low-income families. Because a lot of HBCUs are private institutions with pricey tuition costs, many middle-to-upper-class families are fearful that the changes to the PLUS loan will hurt them as well.

“The new changes took effect in October 2011. Prior to the change, the loan program looked at whether an applicant had an adverse credit history for an account in the past 90 days,” Richard DelaHaya, director of Tennessee State University Department of Media Relations said in a statement to the Tribune. “Now the program looks for delinquent accounts during the last five years. The examination includes foreclosures, bankruptcies, wage garnishments, repossessions and tax liens, in addition to past due payments on bills such as utilities. The Department of Education said the changes were made as part of an effort to more closely align government lending programs with industry standards and decrease default rates. Of course this had an adverse effect on families and students everywhere, but HBCUs were hit harder because of many students come from low-income families and are dependent on PARENT Plus Loans and denied loans because of the new standards.”

Most education leaders agree that lack of finance plays a crucial role in the turmoil and instability taking place at HBCUs.
“Until HBCUs figure out ways to shore up income streams, the pressure to fundraise is always going to be great,” Julianne Malveaux, president emerita of Bennett College for five years, told DiversEducation.com.

Ronald Mason, president of the Southern University System, agrees.

“Resources are shrinking and expectations continue to rise,” Mason told DiverseEducation.com. “The issues are compounded at HBCUs due to our historic and current lack of access to wealth.”

In Nashville increased TSU alumni scholarship donations benefited some students threatened by the changes and the action of loan managers at Tennessee State and Fisk universities kept students in school while others around the nation went home after being denied loans.

However at Clark Atlanta University, 500 students were not able to enroll last fall because their parents were denied PLUS loans, resulting in an $8 million budget deficit.

The tougher loan standards led to the rejection rate doubling at all schools, according to an estimate done for the Chronicle of Higher Education by Mark Kantrowitz, a leading financial aid expert and the publisher of FinAid.org. Kantrowitz looked at the National Postsecondary Student Aid Study statistics done by the Education Department.

A survey of member institutions by the National Association for Equal Opportunity in Higher Education, a group representing predominantly black colleges, said the families of more than 14,000 students at historically black colleges were denied PLUS loans last fall.

PLUS loans are federal loans that graduate or professional degree students and parents of dependent undergraduate students can use to help pay education expenses. The U.S. Department of Education makes Direct PLUS Loans to eligible borrowers through schools participating in the Direct Loan Program.

Here’s a quick overview of Direct PLUS Loans:
• The U.S. Department of Education is the lender.
• The borrower must not have an adverse credit history.
• Loans have a fixed interest rate of 7.9%.
• The maximum loan amount is the student’s cost of attendance (determined by the school) minus any other financial aid received.

The new, more stringent guidelines have had a negative impact on black students across the country.
At TSU 42 percent of students who applied for the PLUS loan were approved prior to the changes now the approval rate is down to 27 percent.

Fisk seems to have weathered the storm better than most HBCUs because the Financial Aid office heard about the changes early and began preparing students in December.

William R. Harvey, president of Hampton University serves on President Barack Obama’s advisory board on historically black colleges. He pulled together meetings between HBCU representatives and Education Secretary Arne Duncan this fall to address the problem.
“It was a crisis situation for all of us,” Harvey is quoted as saying.

Since then, the Education Department agreed to allow students who were previously enrolled with the help of a PLUS loan to appeal the decision and qualify for it again if the denial was caused by the new criteria.

Colleges have been contacting students and their families to try to get them to re-enroll. At Howard University in Washington, D.C., nearly 600 students have had their PLUS loan appeals approved for last fall and spring semesters.
However, the problems still remain for future students, and the decline in enrollment already resulted in devastating blows to some schools.

Last week according to the conservative newspaper the Washington Times, HBCUs are contemplating suing the administration. Officials at various Historically Black Colleges and Universities (HBCUs) say that they were not given advanced notice of changes in loan standards resulting from new eligibility requirements coming from the US Department of Education.

“We’re going to continue to pursue the legislative process to find a better solution,” said Johnny C. Taylor, president and CEO of the Thurgood Marshall College Fund. “[But] if at some point we determine that there is no agreement, then we may have to consider going to the courts.

“We are not itching for a fight, [but] we need to do what is necessary to protect what is the most vulnerable and fragile in our society,” he said.

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