With GOP Cuts And Plus Loan Eligibility Changes, Obama Administration Looks To Get HBCUs Back On Track

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Plus Loan HBCU pell grants

To high acclaim, President Barack Obama renewed the White House Initiative on Historical Black Colleges and Universities (HBCUs) in 2010. The initiative proposed nearly $100 million in new funds for the 2011 fiscal year, with many HBCUs looking forward to a reinvigorated focus on their institutions as well as the communities they serve.

But these days, the President’s enthusiastic commitment to HBCUs feels more like a distant memory as earmarked dollars have dried up with a recalcitrant Congress that would rather see significant subjects, such as education, increasingly drop further down the list of priorities. In addition, the Administration’s changes to Plus loans, which has had a crippling effect on both HBCUs and their students, have morphed what was supposed to be an empowered period of growth and excellence for these storied institutions into a time of precarious desperation to keep their doors open.

In a meeting with Secretary of Education Arne Duncan (pictured above, center) and Acting Deputy Secretary Jim Shelton (pictured above, far left) as well as recently appointed White House HBCU Executive Director Dr. George Cooper and Deputy Director Dr. Ivory Toldson, NewsOne took part in an intimate conversation about how the Administration will help HBCUs fulfill the President’s goal of making America the leader of college graduates by 2020 — in spite of harrowing challenges.

SEE ALSO: REPORT: NewsOne Breaks Down President’s Plans For Black Community In Second Term

A New Day Truncated

When President Obama signed the HBCU initiative, he initially put aside a reported $98 million for HBCUs at the Department of Education, $20.5 million for its capital financing program, $64.5 million for its strengthening Black graduates program, $103 million for its STEM program at the National Science Foundation, and increased the all-important Pell Grant to $5,710. And immediately it appeared that a new chapter had begun for HBCUs; the enthusiasm was palpable.

But shortly after, Obama Administration officials realized that the credit review process for PLUS loans, which parents take out in order to secure an education for their kids, needed to changed.

In 2011, the Department of Education began using stricter criteria to scrutinize the unpaid accounts and collection agencies of potential borrowers for the last five years, which was incidentally the beginning of the Great Recession and the start of staggering rates of unemployment in the Black community.

Shelton explains why the Administration was forced to change their credit review process:

“What had happened for the prior 6, 7 years is, if you were a family who had a $700 debt that you were 90 days behind on, you would probably be denied for a PLUS Loan — this is under the old rules. But if you were a family that is current but has a $7,000 debt that had been charged off 6 months ago, you probably would have gotten approved,” Shelton said. “So the guys who are responsible for running these systems are saying, we have a huge hole in our credit criteria, and there is no way to explain it if I get called up by Congress.”

And according to Shelton, once the Administration realized that their credit review process was faulty, legally, they couldn’t look the other way, “So they fixed it, but what should have happened was a series of communications and supports and all the things that happened this year should have happened right when they were thinking about making that change.

“And that’s what didn’t happen.

“So everybody got caught off guard and then you start to see it snow ball. This is where we are now, where we have all the interventions in place, all the supports, we got the supports directly to the colleges and their financial aid offices.

“From that list of all the applications, we know exactly who those students are [who lost PLUS loan funding], and we know whether they show up at a different campus…. We know what those numbers look like, but everyone is working to close that gap.”

But for some HBCUs, the damage was already done.

The PLUS loan credit changes would have a devastating effect on borrowers and HBCUs, alike, with the parents of HBCU students reportedly being rejected at a rate of 50 percent, according to the Chronicle of Higher Education, and all 105 HBCUs lost millions of dollars due to students who were forced to go to other institutions for their education.

In fact, Politic365 claims that the credit changes to PLUS Loans caused HBCUs to collectively lose $160 million.

Shelton and Secretary Duncan countered that number, though, insisting that while there were undeniable losses to HBCUs, figures, such as $160 million, are out of bounds, “When families don’t qualify for PLUS, their students automatically qualify for unsubsidized loans,” Shelton said. “When you look in aggregate across all the HBCUs, the amount that HBCUs overall got from new unsubsidized loans actually outstripped what was lost in PLUS loans.”

Secretary Duncan explained further, “So this revenue source [PLUS loans] went down, this revenue source [unsubsidized loans] went up, but this revenue source [unsubsidized loans] actually went up more than this one [PLUS loans] went down.”

Congress Starves HBCUs One Cut at a Time

An elephant in the room that could not be ignored was the intermittent fight the President and Sec. Duncan have been having with Congress to not cut funds for education, but beginning on July 1st last year, Congress cut Pell Grants due to the sequester.

RELATED: President On Sequester: ‘The Pain Will Be Real’

The result?

America’s poorest college students — which include many African-American students who rely on Pell Grants the most–lost aid. Not only did Congress cut the funding for the grants, but they also limited the amount of time the grants would be available. Consequently, whereas a student could continue to use the grants for up to 9 years, now students lose their grants if they haven’t completed their degree in six years. And while that may seem like a lot of time, for many students who rely on Pell Grants, being a nontraditional student usually means that they are paying their own way through school or have added responsibilities, such as children.

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