HBCUs Must Fight Back Against Disastrous Loan Policies

October 18, 2013

Beginning in Fall 2011, the criteria for parent PLUS loans unexpectedly tightened, resulting in tens of thousands of students losing much-needed funding and subsequently being forced to drop out of college. The schools most affected by these changes have been historically black colleges and universities (HBCUs) who have seen potentially catastrophic drops in enrollment as a result of these policy changes.

HBCU Plus loan denial crisis

Image source: Politic365.com

What’s interesting is that while HBCUs have complained about the change, they have tiptoed around laying blame at President Obama’s doorstep when it was his call to tighten the loan factors. There was talk in the Fall of 2012 of a lawsuit against the administration to reverse the policy change, but since it was a tight re-election, HBCUs tabled the lawsuit. But should political concerns outweigh the needs of minority college students?

A recent article by the Huffington Post says HBCUs are turning to Congress for help in readjusting the loan criteria for PLUS loans that was changed to more heavily weigh parents’ credit scores. But why not go to the source of the policy change for a reversal? After the criteria change, roughly half of former borrowers were denied much-needed loans – loans that largely go to parents of low-income students whose parents simply can’t afford the costs of education and have few other sources of financing.

PLUS loan denials see 10,000 students drop out

Image source: HuffingtonPost.com

At some colleges, PLUS loan denial rates jumped as high as 75%. The Department of Education’s intent with the policy adjustment was to address the higher loan default rates by parental PLUS borrowers which are drastically higher than general student loan default rates. The directive came through the Department of Education, which is under the purview of the Obama administration. Tightening of the credit criteria did not come through Congress, but came from the White House.

In addition, another White House program – the college scorecard rating system –could result in less federal money being directed to HBCU’s. So why then are HBCU’s directing their attention to Congress? Why not to the White House? Why not initiate a high profile media blitz to publicize that more than 10,000 minority college students are dropping out each year because they can’t afford college? With many HBCUs being smaller schools, enrollment drops may prove disastrous, so why isn’t this a higher profile issue?

Arne Duncan led disastrous PLUS loan policy change

Image source: Crewof42.com

Education Secretary Arne Duncan recently issued a mea culpa about the way the policy change was meted out – without the DOE publicizing the policy and simply pushing it into effect. Duncan told an assembly of HBCU leaders, “I am not satisfied with the way we handled the updating of PLUS Loans, and I apologize for that.” But then he immediately shifted the focus to the budget shutdown and blamed House Republicans for HBCUs running short of funds.

Clearly this is not an issue that can be blamed on a single political party. Obama’s Democratic-led administration clinched up credit for parent PLUS loans and it is true that Congressional Republicans have fought tooth and nail on the budget. HBCUs must decide if they will continue to allow minority student to be disenfranchised by political reindeer games played by both parties, or if they will take a stand to protect students, no matter the political or PR costs!

To track your student loans and optimize your debt, sign up for Tuition.io’s free student loan management tool. Also check out our student loan help center for informative How To guides!