Afican-American Students Hit Harder By Fed Loan Changes

By Staff

Stanley Carter /

According to a report in the Chronicle of Higher Education, many students on the campuses of historically-Black colleges and universities (HBCUs) may have to drop out of school. This comes on the heels of recent changes to the PLUS loan program, which tightened up the eligibility requirements for parent borrowers.

At Morgan State, for example, the Chronicle reports that, as of the end of September, a few hundred students had yet to pay the balance for this semester h– but had been allowed to go to class. As they faced having to withdraw, however, Morgan State was holding “reinstatement day” to advise them on how they could come up with the money to stay enrolled. Waiting to speak with financial-aid counselors, some students compared situations, while others frantically called their parents. Signs along the hallways read: “There Are No More On-Campus Work Study Positions Available Until Further Notice.”

Among the students waiting were some whose parents had been denied a PLUS loan, federal aid to help finance children’s college costs. A tightening of the loan program’s eligibility criteria two years ago has hit historically black colleges like this one especially hard, as they serve many students who rely on the loan, and a considerable share whose families no longer qualify. Seeing enrollment declines, some colleges have formed a coalition to protest the change. Students, meanwhile, have had to drop out or scramble to find other forms of financing.

At Morgan State, students’ families received about $4-million less in PLUS loans this year than they did in 2012, said Tanya Wilkerson, director of financial aid. “We’ve really taken a hit with the new changes,” she said between advising students on reinstatement day. “It’s just been a big ordeal for us with our students not being able to meet the gap,” she said, “especially for those who have been eligible for the parent PLUS loan in the past.”

U.S. Education Secretary Arne Duncan apologized to historically black colleges for what he called poor communication by the department on the changes in loan eligibility. Until 2011, applicants were approved for a PLUS loan as long as they were not more than 90 days delinquent on any debt, and did not have any foreclosures, bankruptcies, tax liens, wage garnishments, or student-loan defaults in the past five years. Under the new standards, unpaid debts in collection and student loans written off as unpayable in the previous five years also count against applicants.

Leaders of historically black colleges and in the African-American community are lobbying the Education Department to change the standards back, arguing that there was no evidence of high default rates on parents’ PLUS loans.

The department, which does not track defaults for the PLUS program, has said the changes bring its credit standards in line with those of other federal loan programs and ensure that parents are not taking out loans they can’t afford to pay back. Still, the department said it would reconsider the PLUS loan approval criteria in a spring rule-making session.

For now, Morgan State, like other historically black colleges, is trying to keep students enrolled. In August, university officials held an emergency fund-raising drive, aiming to bring in $300,000 for 300 students whose parents had been denied PLUS loans and needed funds for this fall.

The drive ended up yielding just under $100,000, and 100 students were each awarded a $1,000 scholarship.

The students who had come up short this semester included many juniors and seniors who were denied aid they’d received in the past.

From March through September of this year, more than 60,000 parents applying for PLUS loans for students at historically black colleges were denied, a denial rate of 70 percent, according to data from the Education Department. Before the tightening of eligibility criteria, that rate hovered between 40 and 50 percent. Students whose parents are denied the PLUS loan automatically qualify for more in unsubsidized Stafford loans. Unlike with parent PLUS loans, however, which have no cap, students can borrow only up to a certain amount in additional federal loans.

In response to the outcry from historically black colleges, the federal agency revamped its appeals process for PLUS loans this year. Both colleges and applicants are now notified if they are eligible for an appeal. Parents who received a PLUS loan under the old guidelines are reconsidered, as are applicants whose outstanding debt is under a predetermined limit.

About a third of the applicants from historically black colleges denied this year were eligible to appeal. Of those, 38 percent, or just over 8,000 applicants, filed for reconsideration. Virtually all of them—98.5 percent—were then approved for a PLUS loan.

The tweaks in the reconsideration process are not enough, however, for the coalition of colleges and advocacy groups that is threatening to sue the Education Department over the changes in the PLUS program. They contend that the tighter eligibility criteria have directly led to sharp declines in enrollment and revenue for historically black institutions.

For some students, the unexpected denial of a PLUS loan has been devastating. Howard provided $88-million in aid for its students this year, up from $58-million in 2008, says Wayne A.I. Frederick, the provost. But with the cost of attendance now more than $40,000, that sum can’t cover everybody.

Applications for PLUS loans for Howard students have dropped 20 percent in the past two years, the provost says. More students and parents are instead taking out private loans, which tend to have higher interest rates, he says. Enrollment had dropped at Howard but bounced back this fall.

For students who want to stay here at Morgan State this semester, time is running short. The ­financial-aid office will continue to work with students past reinstatement day on a case-by-case basis, as the university tries to retain any it can. Morgan State’s head count is down to 7,192 students, including those who have yet to pay their bills, according to data provided by the university. Its total enrollment last fall was nearly 8,000.

Morgan State’s student government is also working to help students who need aid, particularly upperclassmen close to graduation. One resolution would put 10 percent of the student government’s budget toward a scholarship fund for graduating seniors.