An estimated 14,000 black students were not able return to campus this fall. Their absence was the direct result of a reinterpretation of a loan program designed to help poor and minority students cover the cost a college education.
The story behind this crisis is a disturbing mix of unfulfilled campaign promises and a seemingly callous disregard for the academic mission of Historically Black Colleges and Universities.
Early in the first Obama administration a gap funding loan program was created to cover the difference between PELL grants and other government backed college funding. The program is known PLUS, an acronym for Parent Loan for Undergraduate Students.
PLUS loans were designed for parents whose credit history would disqualify the family from securing a traditional bank loan to cover college expenses. When the program was launched parents with good credit history with the last 90 days (no bankruptcy, garnishments, liens etc.) would qualify for a loan.
However, in October 2011 the Department of Education added new underwriting standards, which made it significantly harder to get approval for a PLUS loan. Instead of 90 days parents were required to prove their credit worthiness for five years. “Based on last year’s trends, nearly half of would-be PLUS borrowers this academic year might be turned away” says Mark Kantrowitz, publisher of Finaid.org.
An estimated 90% of black students rely on loans to help pay for college. “The denials have hit particularly hard at historically black colleges and universities,” said Johnny Taylor, director of the Thurgood Marshall Foundation. The concern that HBCU students might not return to college because they can’t get loans has proven true for thousands sophomores, juniors and seniors.
Parents have come to rely more on PLUS loans to pay the tuition bills, “as college prices continued to rise and home equity lines of credit have dried up” says Inside Higher Ed writer Libby A. Nelson. “Historically, the approval process for the loans has been relatively lax” Nelson writes.
“The change was made quietly -- the department didn’t convene a rule-making panel or issue a letter to colleges explaining it -- but the impact was dramatic,” Kantrowitz said. “Denials for PLUS loans jumped after the new requirement took effect, midway through the 2011-12 academic year. According to preliminary Education Department data, 38 percent of applicants for the loans were denied -- 10 percent more than in the previous year.”