Higher Ed Ponzi Scheme Hurts the Poor Most of AllHoward University and several other historically black colleges and universities around the country have been facing serious financial shortfalls this year. Earlier this month, the vice chairwoman of Howard’s board of trustees sent a letter to trustees sounding the alarm on the university’s financial situation. Days later, the chairman of the board announced that there was nothing at all to worry about, and that Howard remained “financially and operationally strong.”
The Washington Post has gotten to the bottom of just what’s going on: a 2011 technical adjustment by the Department of Education tightening lending requirements has led to a precipitous drop in the approval rates for loans to parents of students—11 percent nationwide but up to 36 percent for historically black schools, a reflection of the fact that their students are more likely to come from poorer families with lower credit scores.
Predictably enough, the lobbying knives are out, reports the Post:
For the Obama administration, the uproar over parent loans at HBCUs poses a political challenge. Leaders of the United Negro College Fund and the Thurgood Marshall College Fund have pressed Duncan for relief for parents and students they say have been unjustly deprived of loans. The administration has helped with loan appeals but has shown no indication that it is willing to reverse the 2011 action.
Credit is due to the Obama administration for holding the line on this for now. While our heart goes out to the students scrambling to cobble together tuition payments in order to complete their studies, a set of statistics in the article points to the true culprit in this story:
Federal data show that tuition and fees at Howard doubled from the 2000-01 school year to 2011-12, to about $20,000 a year. In that span, the volume of federal loans approved for parents of Howard students more than quadrupled, to about $45 million. Tuition and fees at Howard are now about $22,700 a year.
You’d be hard-pressed to find a more concise illustration of the term “bubble.” This is a clear sign of how the unconscionable upward drift of college tuition and fees are stressing the most vulnerable. The pressure on Washington to ease the lending standards for these loans is happening so that this game can go on for yet another round. But at some point, the game will have to end, and a generation of young people will be left with loan payments that will stretch lifetime earning potential to the breaking point. To deny this ugly truth is just delusional.