ED Backs Continued Default-Rate Exemption for HBCUs

The U.S. Department of Education (ED) has asked Congress to extend the current exemption from default-rate penalties for historically Black colleges and universities.

HBCUs and tribally controlled colleges are exempt from the penalty framework, through which ED can deny access to loans and grants for students who attend schools with high default rates.

Under ED's plan, the exemption would continue through the year 2000. At that point, exemptions would continue for those institutions "showing improvement in their default rates."

Supporters of HBCUs and tribal colleges have called the exemption essential for institutions that serve a large number of low-income, disadvantaged students. Past studies have shown that many HBCUs would face default sanctions without the exemption.

However, the proposed change could leave some HBCUs vulnerable to default penalties if they fail to demonstrate progress, based on ED's draft. Those that face sanctions also may encounter a new default penalty system, if ED gets its way.

Another change sought by the department would cut the number of ways a school could face default penalties from two to one. Under the new plan, schools could lose access to all financial aid -- including grants and loans -- for three-year default rates in excess of 25 percent.

Under current law, schools with default rates above 25 percent for three consecutive years could lose access to loans. Schools could lose access to both grants and loans only for one-year default rates of 40 percent or more.

That change already faces criticism from some in higher education, including community colleges.

"We oppose any effort to link loss of loan eligibility with loss of eligibility for other programs," said Noah Brown, legislative director for the Association of Community College Trustees. Two-year college leaders have long criticized the existing system for hurting colleges with low tuitions and few borrowers.