RALEIGH N.C. – One of the South’s oldest historically Black colleges landed a $31 million federal loan that shifts millions of dollars in debt from bankers to taxpayers.
The U.S. Education Department loan, secured with help from U.S. Rep. Bob Etheridge, D-N.C., allows Shaw University to shift millions in debt that it owes to Charlotte-based Bank of America, The News & Observer of Raleigh reported Wednesday.
The cash-strapped school’s interim president, Dorothy Cowser Yancy, said the federal loan restructures several pieces of privately held debt. She would not disclose the size of the loan because Shaw is a private college.
Education Department officials confirmed the amount is roughly $30 million, the newspaper reported.
“The debt needed to be renegotiated,” Yancy said.
A memo from interim Vice President Lee Monroe said the deal allows Shaw to stretch out repayment over 20 years, reduces collateral, and drops the interest rate nearly two percentage points to 4.1 percent.
About 2,700 students attend Shaw, a liberal arts university affiliated with the Baptist Church. Founded in 1865, Shaw describes itself as the first historically Black college of the South.
The school’s money troubles are shared by other small, private Black colleges forced to struggle as the recession dries up donations. President Barack Obama signed an executive order in February making historically Black colleges eligible for more federal programs.
Etheridge said Shaw’s president and attorney contacted his office, calling it an urgent matter, and he spoke with U.S. Education Secretary Arne Duncan about moving quickly. He did not know either the size of the loan or the terms, he said.
“We never ask that,” he said. “We don’t have any business knowing that. … Certainly Shaw is the oldest historically Black institution in the South. They’re important not only to Raleigh but our district. But we try to take all the calls from our constituents whether they’re small or large.”
Shaw is seeking a new president and preparing for its accreditation to be renewed in 2012. Yancy was hired last year to replace Clarence Newsome, whose six years as Shaw’s president ended with growing debt, decaying dorms and a graduation rate of about 36 percent.