New Rule Threatens HBCUs

A proposed new federal rule could have unintended negative ramifications for historically black colleges and universities, argues Julianne Malveaux.

July 12, 2016
Bennett College

The U.S. Department of Education introduced a new rule on June 13 that could have an outsize negative impact on historically black colleges and universities.

And no one noticed.

As the former president of Bennett College -- the nation’s oldest historically black college for women -- I have been honored to play a role in increasing the immense opportunities HBCUs have provided to black students and other students of color over the past 150 years.

I have also witnessed the sharp increase of higher education costs, even as the importance of a good college degree continues to grow. Millennials will be burdened with more student loan debt than any other generation before them. According to The Wall Street Journal, cumulative outstanding student debt has surpassed an astounding $1 trillion. Yet with a decline in state and federal support -- states are now spending, on average, 20 percent less per student than they did in 2008, according to one think tank -- colleges and universities are more and more dependent on tuition for their financial stability.

Although HBCUs provide excellent academic opportunities for their students, they do not have the monetary security other colleges and universities enjoy. For example, top-rated HBCU Howard University maintains an endowment of about $660 million, while top-rated non-HBCU Harvard University has an endowment of $36 billion.

This fiscal contrast could become an immediate problem for HBCUs and their students in light of the Education Department’s new proposed rule.

The department recently announced the revised borrower defense to repayment regulation, which would allow students to sue their college or university and default on their loans if they think that the institution misled or defrauded them during the time they were enrolled. The original rule has been around for 20 years and provides essential protections for students who have been defrauded by their educators. The revised rule would greatly expand the criteria for students to sue their educators, with a far lower burden of proof on the student.

While I agree that students must be able to petition their educational providers for student loan forgiveness if they feel they have been defrauded, I worry about the unintended ramifications of such an enormously wide-open regulation. The Education Department has estimated it will have an economic impact of $4.2 billion in tuition repayments and other costs, but that could be just the tip of the iceberg. Institutions could also accumulate mounds of fees, as legal counsels attempt to wade through the vague and confusing regulations -- a cost HBCUs can ill afford.

The new rule has other costs and implications for HBCUs, as well, by requiring institutions to obtain new and costly letters of credit from lenders. HBCUs could be negatively impacted by “financial responsibility regulatory requirements,” which could threaten “their ability to continue their historic education mission,” according to a May 2016 letter from the United Negro College Fund.

My concerns mirror theirs.

According to a Gallup-Purdue University report, black students who graduated from historically black colleges felt more supported, both academically and emotionally, than their black peers at predominantly white institutions. Additionally, HBCUs graduate 18 percent of all African-American undergraduate students and 25 percent of all African-Americans in science, technology, engineering and math fields.

I had the privilege of working alongside many bright young women of color at Bennett who have graduated to become doctors, lawyers, teachers and engineers and have all made significant contributions to the American workforce. And I hope HBCUs can continue to produce such exemplary students of color.

Unfortunately, if this rule is implemented in its current form, opportunities for black students to receive the education they need to compete in the 21st century could decline. HBCUs would be forced to funnel their already limited monetary resources into unnecessary legal counsel instead of into the classrooms where they belong.

The proposed language in the rule is vague, difficult to understand and could cost taxpayers up to $43 billion over the next 10 years. The rule change was doubtless written in reaction to the May 2015 bankruptcy of Corinthian Colleges, a for-profit college system. The federal government may have to forgive millions of dollars in loans Corinthian students now owe. HBCUs are different from for-profit colleges, but the hastily written language of the rule makes no distinction among types of institutions.

We can all agree that students must have strong protections if they can prove they have been defrauded by their academic institution. Those protections already exist, and students should be better informed of their current rights and better empowered to pursue loan forgiveness in the case of legitimate grievances. But that shouldn’t come at the cost of financial instability, especially for HBCUs whose fiscal position is often not as strong as traditionally white institutions. Policy makers should revisit the rule and include HBCUs in the public comment process, which should be extended to take into account an examination of these issues.

I am hopeful that the Department of Education will consider these concerns and invite us to the discussion table before the comment period closes Aug. 1, and will do what’s in the best interest of students, educators and taxpayers. But in the meantime, it’s essential that our community makes our voices heard.


Julianne Malveaux is an author and economist and the founder of Economic Education. She is the former president of Bennett College, America’s oldest historically black college for women.


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