The following is a part of a series on the intersections of accreditation, finance, and enrollment at historically black colleges and universities. Part I can be found here and Part II can be found here.
PART III – DEATH BY DEBT
In July 2001, Bennett College for Women secured its first loan from the U.S. Department of Education’s HBCU Capital Financing Program in the amount of $8.7 million. The program, launched in 1992, was developed to provide HBCUs with funding for facility repair, renovation, and construction of facilities, research support and refinancing of non-federal debt.
It was the first of three loans issued to Bennett between 2001 and 2010 totaling $39.2 million. The second and largest of those loans was a 2009 loan for $21 million, and a year later, Bennett opened the Honors Residence Hall, the largest residential facility on campus with a capacity for 144 students, with guest suites, lecture space, and computer labs.
According to the college’s 2017-18 annual report, Bennett had more than $35.1 million in long-term notes, mortgages and bond payments, a figure which had jumped more than $2 million from the previous year. It is this number which may be the most direct contributor to Bennett’s accreditation loss, and the greatest source of jeopardy for its financial future.
WHAT IS THE HBCU CAPITAL FINANCING PROGRAM?
According to the Department of Education, the program has supported unprecedented physical expansion at HBCUs throughout the country over the last 27 years.
Through repayments and refunding, there are currently 40 colleges and universities with loan amounts ranging from $7.5 million to $165 million. These institutions have received 53 HBCU Capital Financing Program loans totaling approximately $1.8 billion. Public HBCUs have received about $530 million in loan proceeds and private HBCUs have received about $1.27 billion in loan proceeds.
U.S. Department of Education
But these loans come with an unpublicized, hefty price for participating colleges. To become eligible for these loans, colleges have to demonstrate financial backing to the government in a variety of forms, including securing letters of credit from non-federal banks and financial institutions, and putting up existing campus buildings for collateral.
These factors were cited in a 2018 report issued by the federal Government Office of Accountability (GAO), which suggested that more HBCUs needed to participate in the program and critiqued the Department of Education for not doing more to promote the program to HBCUs, but which also detailed the struggles of some campuses to comply with the terms of borrowing.
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.
Action Needed to Improve Participation in Education’s HBCU Capital Financing Program – US Government Accountability Office
A year prior, the Wall Street Journal profiled the hard data on just how many HBCUs were unable to make timely repayment to the federal government for these loans, and the tale of what happens when a school is unable to make payments for an extended period and is seized by the federal government.
Minutes from advisory board meetings show that while Barber-Scotia’s campus had been put up as collateral against the loan, officials didn’t foreclose on it. And a decade after the default, the university continued to market it for sale.
Many of the HBCU capital-financing loans are secured by mortgages on or revenue from campus buildings, including structures for which the funds are borrowed to build.
(U.S. Department of Education Loan Officer Donald) Watson explained in 2012 that proceeds of the Barber-Scotia campus sale would first go to cover the remaining debt payments, and anything left over would refund schools whose escrow funds had been tapped.
Barber-Scotia is still in default, and the campus hasn’t been sold, the Education Department said.
A School Defaults, a For-Sale Sign Goes Up, but No One Bites – Wall Street Journal (Melissa Korn)
WHEN HELP COMES TOO LATE
In 2018, the U.S. Department of Education granted loan payment deferments to eight private HBCUs, in the hopes of salvaging the financial standing at each campus.
The initiative will postpone principal and interest payments from Bennett College, Florida Memorial University, Huston-Tillotson University, Saint Augustine’s College, Shaw University, Vorhees College, Wilberforce University and Wiley College for six years, and will refund payments made by the schools during the last fiscal year.
While Saint Augustine’s was able to receive accreditation reaffirmation last December after years of probation for financial instability, SAU President Everett Ward announced his plans to retire just weeks after the decision.
A lawsuit is the only thing maintaining Bennett’s accreditation, and Wilberforce is currently on probationary status for a lack of institutional resources and issues with strategic planning and quality enhancement in student learning and professional training outcomes.
Wilberforce’s probation comes just five years after being issued an accreditation show-cause sanction by the Higher Learning Commission.
IDEAS VS. INSTITUTIONS
If Bennett College were to use the entire $10 million it raised during its #StandWithBennett accreditation awareness and fundraising campaign, it would only satisfy a third of the school’s long-term debt, and just over half of that amount would recover the nearly $6 million in revenue losses the school has experienced over the last decade.
While details of its federal loan terms are not disclosed to the public, Bennett and other HBCUs in a similar position of enrollment shortfall and bank and bond repayment obligations could force the schools to surrender campus property to the U.S. Department of Ed. Their financial options could grow more limited by the day, and their debts to banks, bondholders and taxpayers could grow because of an inability to produce revenue.
Many people say they believe in the idea of HBCUs. They say they believe that campuses designed for black people should exist free of racial isolation, full of racial pride and ambitious with the promise of learning, training and community building.
But the numbers suggest that we don’t believe in certain institutions living out that idea. We don’t enroll in certain schools, we don’t give to certain schools, and we don’t demand accountability from most of them. And save for the forced transparency of accreditation and its mandated reporting and review, we would never know just what kind of crisis the majority of our campuses face.
We would never know that Bennett could be accredited by SACSCOC, the Transnational Association of Christian Colleges, or any other agency and could still close in the blink of an eye because it simply ran out of money and time.
And the worst part is that we think Bennett is the worst possible case we could ever see. In a few short years, our struggle to unite the idea of HBCUs with the truth of the institutions themselves will reveal our greatest shame; that we really don’t care about either.