Black Colleges Get More Time to Work on Defaults

WASHINGTON — Legislation likely to gain approval in Congress would allow historically Black colleges an extra two years to work on their loan default problems without penalty.
The bill would give HBCUs until July 1, 2004, to straighten this out or else face  sanctions that could include loss of access to federal student aid programs. At issue is when the colleges would become subject to a federal law that levels sanctions against colleges with loan default rates of at least 25 percent for three consecutive years.
HBCUs had a blanket exemption from default restrictions during most of the 1990s, until the 1998 Higher Education Act Amendments replaced the exemption with a more restricted one.
Under the 1998 bill, HBCUs could have an exemption through July 2002 if they developed default management plans and hired outside experts to help reduce their default rates. While still helpful, the 1998 amendment proved cumbersome in its administration. Due to delays in receiving information, for example, the federal government in 2002 will only have default information from 1997 through 1999. The plan approved in 1998 by Congress did not even begin to take effect until July 1 of last year — making it impossible to gauge success based on the data available by 2002.
Extending the exemption until 2004 will give officials with Congress and the U.S. Department of Education time to collect data to assess the effectiveness of the new policy. Among those seeking the extension were members of the United Negro College Fund and National Association for Equal Opportunity in Higher Education.
"This is very important," says Marshall Grigsby, a senior Democratic aide on the House committee. "It's one of the top agenda items for UNCF and NAFEO this year."
The same new bill with the HBCU provision also would provide some benefits for tribal and Hispanic-serving colleges, which could get more funding flexibility as well.