Students at historically black colleges and universities (HBCUs) rely more heavily on federal student loans, and borrow significantly greater amounts, to pay for college than their non-HBCU counterparts, according to a new issue brief from the United Negro College Fund (UNCF).
The brief focuses on the rates and amounts of student loan debt taken on by undergraduate students at HBCUs, as compared to non-HBCU students. For example, a higher proportion (25 percent) of students at HBCUs borrowed federal student loans to pay for college than non-HBCU students in 2013. Eighty percent of HBCU students borrowed federal loans that year, compared to only 55 percent of non-HBCU students.
The amount of money borrowed through federal loans is also higher among graduates of HBCUs than at other institution types, with HBCU bachelor’s degree recipients in 2012 borrowing close to twice the amount of federal loans as those at non-HBCUs, $26,266 versus $14,881. In the same year, 25 percent of HBCU bachelor’s degree recipients borrowed $40,000 or more in federal loans to pay for their education, compared to only 6 percent of non-HBCU bachelor’s degree recipients.
HBCU students also borrow federal unsubsidized loans and Parent PLUS Loans at higher rates than non-HBCU students, according to UNCF. Among HBCU students in 2014, 65 percent borrowed a federal unsubsidized loan and 10 percent borrowed a Parent PLUS Loan, compared to only 36 percent of non-HBCU students who borrowed an unsubsidized loan and only 6 percent who borrowed a Parent PLUS Loan. HBCU students are also more likely to combine federal, state, and private loans to pay for college, with 12 percent borrowing a combination of the three in 2012. Only 8 percent of non-HBCU students borrowed a combination of the three types of loans in 2012.
When it comes to repayment, HBCU students have average cohort repayment rates that are significantly lower seven years after leaving college than their non-HBCU peers, 59 percent versus 85 percent. However, UNCF notes in the brief that the data does not take into account factors like student economic status, choice of educational program, or labor market conditions.
According to UNCF, HBCU students typically come from lower-income families, thus increasing their need for financial assistance to pay for college. Addressing the unique financial struggles that HBCU students face in paying for college is “critical” and there are several things policymakers can do to reduce the student loan burden these students face, UNCF states in the brief.
To start, policymakers should reduce the complexity of the process to determine eligibility for federal student aid and increasing available grant aid, allowing more low-income students to access resources to pay for college. A proposal made by the Obama administration and a bipartisan group of legislators to simplify the FAFSA “should be a priority” for the upcoming reauthorization of the Higher Education Act, according to UNCF. Furthermore, consideration should be given to proposals to set federal aid eligibility for more than one year, eliminating the need for qualified students to file the FAFSA annually. The federal needs analysis methodology can also be adjusted to better account for very low levels of income among many HBCU students.
Other potential policy solutions include shoring up the Pell Grant Program by increasing the maximum available award, restoring a version of the year-round Pell Grant, providing students with Pell bonuses, and expanding the SEOG program for Pell students. Expanding and better targeting the Federal Work-Study (FWS) program can also help provide financial resources and work experience to HBCU students.
UNCF also recommends making federal loans less costly for families and students, creating a single, automatic income-based repayment plan as a default option for borrowers, and increasing oversight over federal contractors and loan servicers to improve services provided to borrowers.
Publication Date: 12/15/2016