Historically Black colleges and universities received much-needed debt relief from the federal government as part of the recent COVID-19 relief bill, a change leaders say allows them more financial freedom to invest in their futures.
Congress passed a behemoth spending bill last month that included a variety of COVID-19 relief measures and earmarked $20.2 billion for colleges and universities. Also buried in the omnibus spending package is $1.3 billion in loan forgiveness for HBCUs that borrowed money through the federal government’s HBCU Capital Financing Program. The program was established in the 1990s to provide access to low-rate capital that would allow HBCUs to refinance existing debt, make infrastructure repairs and renovations, and work on new construction.
Debt and a limited ability to access capital has historically hindered HBCUs. They serve students whose families often have less wealth than those attending predominantly white institutions, and they often find themselves with relatively limited philanthropic or borrowing options when they need to raise cash. As a result, many have struggled to maintain accreditation status because of poor financial health. They have also struggled to keep up with infrastructure repairs — HBCUs that responded to a 2018 Government Accountability Office survey said that, on average, nearly half of their building space needed repairs or renovations.
With more than a billion dollars wiped from their cumulative books, the country’s HBCUs will be able to invest in overdue infrastructure improvements, new construction and student recruitment and retention efforts that had been put off due to high monthly loan payments.
In the 1990s, Congress recognized that HBCUs struggled to access capital at reasonable rates and created the HBCU Capital Finance Program.
The capital finance program worked well until the HBCU marketplace was disrupted about 10 years ago, Murray said. First it was disrupted by the Great Recession in 2008, then once again when the Obama administration raised credit standards for Parent PLUS loans — federal loans that parents take out to help finance their children’s education — in 2011. Thousands of families were denied loans as a result, and enrollment at HBCUs fell to 290,000 students from 330,000.