Press
The 12th Annual Rainbow Push Wall Street Project Economic Summit
14 January, 2009: 10:00 AM EST

Historically Black Colleges and Universities Roundtable Discussion

New York, NY, 15th January, 2009:

Historically Black Colleges and Universities (HBCU’s) are have been facing major economic difficulties directly related to the savings and loan industry. The current financial crisis in America is exacerbating these problems to the point where two institutions Morris Brown University and Barbara Scotia College were in jeopardy of closing their doors.

The HBCU Capital Advisory Board, a coalition of HBCU executives, alumni, students and business owners came together to investigate the root of the difficulties facing the 105 institutions that make up HBCU. Individual schools in the family did not want to talk about the problems they were having with others. Had they done so, they would have realized that theirs was not an isolated situation.

The most critical issue is with the HBCU Capital Financial Program, a loan created by the Department of Education. Andrea Harris, President of North Carolina Institute of Minority Economic Development characterized this program as “having the most costly, over capitalized predatory terms ever seen.” One hundred percent of an institution’s resources; buildings, equipment, endowments and revenue streams are collateralized, whether the college borrows 1 million dollars or 50 million dollars. All 105 HBCU’s are mandated to distribute 5% of their funds into an escrow account. If one institution defaults, all other college and universities have to pay the loan. Lastly, there is a cohort that revokes accreditation from schools if 25% of the institution’s students default on their loans. The HBCU Financial Program has lead to large increases in tuition, student fees, higher loan interest rates, increased application denials and loan defaults.

The HBCU Capital Advisory Board have issued a plea to the Department of Education to suspend the cohort default rate from the Capital Financial Program, decrease student loan interest rates to 1% (from 7%), and asked that TARP funds be used to guarantee program pools for restructuring debt. The request will be taken up the ladder to President Elect Barak Obama.

Moving forward the HBCU Advisory will meet with each institution to help them evaluate their business operations, narrow their focus to what they do best, partner colleges with financial institutions to provide financial education services to students and families. Most importantly, “HBCU’s are businesses, we need to provide strategies for networking that will improve HBCU business positioning. A lot of work has been done, but there is still more to do,” says Jim Dugger, Vice President and CFO of LeMoyne-Owen College.

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