How colleges use debt during times of crisis varies greatly depending on institutional characteristics, according to a new report from Ithaka S+R funded by the TIAA Institute.
The study, released Wednesday, found that while historically Black colleges and universities tend to borrow less than non-HBCUs—a pattern that has remained relatively constant—HBCUs “became significantly more leveraged than non-HBCUs” after the Great Recession of 2008. One explanation for this was that HBCUs borrowed to weather financial hardships, rather than for capital projects such as campus residence halls.
Likewise, public institutions were more likely than private ones to increase debt levels during the recession, which the authors suggest can be attributed to declining state support amid an economic downturn.
“During the Great Recession, states faced significant budget shortfalls, and higher education was frequently at the top of the list of things to be cut. Historically, HBCUs have faced severe underfunding. For both public institutions and HBCUs, these funding shortfalls may have contributed to a need to engage debt markets when other revenue sources were insufficient,” the study found, noting that, over all, colleges that increased debt at that time did so strategically.
The report also looked at how colleges weathered the coronavirus pandemic, noting that the influx of federal dollars helped colleges through a period of financial uncertainty.