HBCUs Making Major Progress In Curbing Loan Defaults

An in-depth review of new federal data shows that historically Black colleges and universities are making major inroads in reducing defaults, particularly at institutions that had high rates for much of the 1990s.
For 1998, only four of the nation's
HBCUs had student loan default rates that could place them at risk for sanctions, including the loss of federal aid. This number marks a dramatic one-year drop from 1997, when 13 HBCUs could have faced default-related penalties.
"If you really monitor and stay on top of the situation, chances are pretty good that you can have a low default rate," says Dr. Nathaniel Jackson, president of Mary Holmes College in Mississippi, one of the HBCUs reporting significant progress in the latest report.
To incur possible sanctions, a college must have default rates of 25 percent or more for three consecutive years. Penalties could include loss of access to student loan and grant programs.
The HBCU improvements are among many key positive indicators on defaults, according to Education Department officials. Nationwide, only 6.9 percent of loans were in default in 1998, down from 8.8 percent in 1997. As recently as 1992, the nation's student loan default rate was 22
percent.
For HBCUs, the improvement is significant because Black colleges no longer have blanket protection against default sanctions. For much of the 1990s, HBCUs — even with high defaults — faced no sanctions. A federal policy exempted these institutions because they enroll a large number of low-income students.
But Congress has tinkered with that plan in recent years. Under current law,
HBCUs with high default rates are exempt only if they submit an acceptable default management plan and retain an independent third party to assist in default reduction. And even this protection could end by 2002 without more congressional action.
The four HBCUs with default rates above 25 percent from 1996 through 1998 are Barber-Scotia College, Concord, N.C.; Livingstone College, Salisbury, N.C.; Southwestern Christian College, Terrell, Texas; and Texas College, Tyler, Texas.
But several HBCUs showed solid progress as they left the list of those at-risk institutions over the 25 percent threshold. Among this group:
l Allen University in South Carolina saw its rate drop from 42.1 percent to 21.5 percent in 1998.
l Central State University in Ohio had a significant decline, from 29.8 percent to 16.5 percent, for the years 1996 through 1998.
l Texas Southern University reported a drop from 29 percent in 1996 to 15.7 percent in 1998.
l Mary Holmes College, a two-year HBCU in Mississippi, saw its rate drop from 37.3 percent in 1996 to 17.7 percent in the latest report.
At the 450-student Mary Holmes College, the decline followed implementation of a default management program with intensive counseling for students before they graduate from school. The college also stepped up efforts to stay in touch with school dropouts, informing them of their responsibilities, Jackson says.
Another component of the default management plan is to make a major outreach effort by telephone to reach individuals before the federal government gets involved in their cases. "It's a good, intensive system," says Jackson, who joined the college in July. He credits a strong default management staff hired before his tenure at the institution.
As the nation's only private two-year HBCU, Mary Holmes faces some unusual challenges. Much like a public two-year institution, the college has an open enrollment system, Jackson says. However, with higher tuition than public two-year colleges, Mary Holmes also must ensure that its students have access to financial aid, including loans.
"We try to discourage loans," Jackson says, explaining that college officials often counsel students to take work/study assistance as an alternative. Still, he notes, "Our students need access to financial aid."
Aside from these institutions, other
HBCUs that have left the list of at-risk schools include: Huston-Tillotson College, Austin, Texas; Lane College, Jackson, Tenn.; Miles College, Birmingham, Ala.; Wiley College, Marshall, Texas.; and Arkansas Baptist College, Little Rock, Ark., based on data from the Education Department. (For a more in-depth look at school-to-school statistics, see chart on pg. 8).
The U.S. Department of Education has a searchable online database with information about individual institutions. Visit the Web site at <http://www.ed.gov> and follow the links to the government's new default report.