13 HBCUs to Retain Access to Federal Financial Aid

WASHINGTON — Thirteen of the nation's historically Black colleges and universities will retain their access to critical student financial aid programs despite loan default rates that could trigger significant penalties.
Congress eliminated a long-standing exemption from sanctions for HBCUs during the last reauthorization of the Higher Education Act. Consequently, the colleges now can be penalized when their three-year default rates surpass 25 percent. 
The exemption ended last July, though the specific wording in the higher  education bill gave U.S. Department of Education officials some latitude on the sanction issue when dealing with HBCUs.
Penalties for high-default schools include the loss of access to student financial aid programs, critical to retaining students. Schools that lose that access to student aid programs often face extinction if they cannot regain their access to the program.
Greg Woods, chief operating officer of the department's Student Financial Assistance office, says the 13 schools had serious default problems but had taken several necessary steps to avoid sanctions.
Each of the 13 negotiated with department officials, submitting a default management plan and using an independent third party to help implement it. Woods says that many of the schools already have cut their defaults below 25 percent.
"It's best for students. It's best for everyone," Woods says of the decision. "We are delighted to partner with HBCUs … to help them lower their default rates while raising their financial accountability."
Last year, a report from a major lender identified those same 13 colleges as being at risk of losing access to financial aid. Department officials say that report "caused unjustified confusion and concern" among students and families.
The report by Sallie Mae, the nation's leading financer of student loans, concluded that historically Black colleges and universities could cut their high rate of student loan defaults by making sure more students graduated.
The schools generally have three times more students failing to repay federal student loans than mainstream colleges and universities — about 21 percent compared with 7 percent — the Sallie Mae report found.
The 13 schools that will continue to participate in federal student aid programs despite high default rates are: Allen University, Arkansas Baptist College, Barber-Scotia College, Central State University, Huston-Tillotson College, Lane College, Mary Holmes College, Miles College, Paul Quinn College, Southwestern Christian College, Texas College, Texas Southern University and Wiley College.
The government's reversal in lifting the exemption caused concern at Paul Quinn College, a historically Black institution in Dallas, says Gloria Richard, the Texas school's vice president for development.
"All of a sudden, everyone has to provide our plans for a situation that was created for us very quickly, and we did," Richards says.