Several HBCUs placed on federal financial sanctions last fall, but context is key

A number of historically Black institutions were placed under financial sanctions last fall by the U.S. Department of Education, including one institution which has lost access to federal funding for student loans.

Students at Denmark Technical College can no longer receive federal aid to subsidize instruction costs at the school, according to federal database information. The historically Black two-year school in Denmark, SC has posted three consecutive years of graduates and former students defaulting on federal loans above the allowed one-year threshold of 40%.

U.S. Department of Education

In 2020, the school appealed to be removed from sanctions according to ED public information, but has been official removed from program eligibility.

A cohort default rate is the percentage of a school’s borrowers who enter repayment on certain federal loans during a particular federal fiscal year covering October 1 to September 30, and default or fail to meet other specified conditions prior to the end of the following fiscal year.

The department has been uneven in recent years at data keeping for default rates, which has been scrutinized for lacking context on the raw numbers associated with graduation or attrition rates.

It is the third consecutive year that the HBCU sector did not post a 100% compliance rate with graduates and former students successfully starting the repayment process for federal loans.

More than 90% of historically black colleges and universities eligible for federal funding are below the U.S. Department of Education’s threshold for student loan default rates, based upon three-year repayment data.

From the U.S. Department of Education:

As of September 2021, 1 eligible HBCU has an official FY 2018 cohort default rate that falls below regulatory thresholds. For the FY 2018 official CDR cycle, only one HBCU is subject to cohort default rate sanctions or the consequent loss of Title IV student financial assistance program eligibility.

HBCUs have deployed innovative approaches towards default management and reduction. Such strategies include implementation of a default management plan that engages stakeholders, identifies approaches to reducing default rates, and tracks measurable goals. These schools have increased borrower awareness of obligations through incorporating borrower topics at orientation sessions and providing enhanced entrance and exit counseling. Other best practices include borrower tracking, increased contact with delinquent borrowers, taking advantage of the cohort default rate challenge/adjustment/appeal processes, and partnering with other stakeholders to optimize default prevention, resolution, and reduction.

U.S. Department of Education

Livingstone College, Wilberforce University, and Virginia University of Lynchburg all posted default rates above 30% at least once in the last three cohorts.

The national student loan default rate for all colleges and universities in the 2018 cohort is 7.3 percent 9.7 percent, a decrease of more than 2% for all borrower default rates from 2017 cohort data.

The default rate parallels the department’s most recent data on heightened cash monitoring sanctions. Monitoring can be levied an institution for a broad range of reasons and is often not an indicator or financial stress.

The most currently listed HBCUs include:

  • Oakwood University
  • Arkansas Baptist College
  • Paine College
  • Kentucky State University
  • Wilberforce University
  • Cheyney University
  • Benedict College
  • Huston-Tillotson University
  • Wiley College
  • West Virginia State University

Schools may be placed on HCM1 or HCM2 as a result of compliance issues including but not limited to accreditation issues, late or missing annual financial statements and/or audits, outstanding liabilities, denial of re-certifications, concern around the school’s administrative capabilities, concern around a school’s financial responsibility, and possibly severe findings uncovered during a program review. Additionally, ED may place a school on the “Reimbursement” payment method if it determines that the school needs the highest level of monitoring. The “Reimbursement” payment method is similar to HCM2, except ED reviews the documentation for all students and parents included in the payment request, not just a sample. Some schools are on this list due to preliminary findings made during a program review that is still open. Those findings could change when the program review is completed.

U.S. Department of Education

Only Cheyney is classified on the list under HCM2.

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