HBCUs Owe The Feds $1.8B in Capital Loans. And The Feds Hope HBCUs Will Borrow More.

Historically black colleges and universities owe the federal government more than $1.8 billion in loans issued through the US Department of Education’s Capital Financing Program, but the federal agency on accountability says the program has been under-marketed and underutilized by HBCUs looking to build or improve their facilities.

The Government Accountability Office has released a report critiquing the US Department of Education for its lack of analysis and promotion of the program, an initiative providing low-interest debt refinancing or capital funds to black colleges for facility upgrades or construction.

The program has been in bipartisan focus on Capitol Hill in recent years, as lawmakers have pushed for increased awareness and relaxed terms of repayment to support growing number of schools brought to the brink of closure due to their inability to pay back the government. From the WSJ:

Two of the participating schools defaulted on their loans last year, according to the GAO report. Twenty-nine percent of payments made in 2017 were late, and four colleges were considered delinquent as of April 2018. Stillman College in Tuscaloosa, Ala., for example, last year appealed to alumni and the local community to cover its payments.

Wall Street Journal higher ed reporter Melissa Korn appeared on HBCU Digest Radio to discuss the report’s findings, details of why the loan has not gained popularity among HBCU leadership, and the future of what the program could mean for borrowing schools in an era of fluctuating enrollment, and uncertain funding for higher education.

According to a GAO survey of 79 responding HBCU presidents, chancellors, chief financial officers, and federal program managers, 48 indicated that their schools carry a mean average of $46 million in deferred maintenance backlogs.

Public HBCUs reported as the least likely to borrow from the federal program, citing interest rates and terms of collateral, but were the overwhelming leader in the amount of, and increasing number of deferred capital projects.

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