Black Colleges Seek Relief From Loan-Default Regulations

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In order to avoid throwing dozens of tribal colleges and historically black colleges and universities out of federal student-loan programs, which could cause some schools to shut down, Congress is poised to pass legislation that would allow them to remain exempt from rules barring institutions with high default rates from the programs.

Under federal law, schools that have posted student-loan default rates of 25 percent or more for three years in a row lose eligibility for the Federal Family Education Loan programs. Congress passed the law in 1990, but exempted tribal colleges and H.B.C.U.'s until July 1994.

Now that the deadline is approaching, advocates for those schools are seeking to extend the exemption. Supporters argue that they serve large proportions of economically disadvantaged students who would otherwise be shut out of higher education.

Without the waiver, students at nearly one-third of the 104 historically black schools recognized by the Education Department would lose loan eligibility, a 1993 General Accounting Office report said.

Four-Year Extension

In addition, if current trends persist, 41 H.B.C.U.'s that have default rates at or exceeding 25 percent could face a required state review of their participation in all federal student-aid programs.

S 2004, which was passed by the Senate last month, would extend the exemption until July 1, 1998. The House is expected to take action on a similar bill when lawmakers return from their spring recess.

"In theory, you could stop the problem by ceasing the lending, or ceasing enrolling students,'' said William (Bud) Blakey, a lawyer who represents H.B.C.U.'s. "But presumably the federal government doesn't want these schools to stop enrolling those students.''

The exemption would allow schools to participate in the loan programs while they work to improve their default rates, said an aide to a sponsor of the House bill.

Mr. Blakey said "part of the problem is in fact systemic'' and improved management may not be enough. "However, we do feel with this extension that the institutions will be in the best possible situation to have addressed the management side of the problem,'' he said.

In a letter to lawmakers, Secretary of Education Richard W. Riley said he supports the bill and is "committed to working with these institutions ... to insure that they are all in full compliance by the end of the extension period."

Vol. 13, Issue 29, Page 19

Published in Print: April 13, 1994, as Black Colleges Seek Relief From Loan-Default Regulations
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