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Sallie Mae to the Rescue

Sallie Mae to the Rescue
Lender Offers HBCUs Help With Loan Default Rates

Historically Black colleges and universities’ decade-long protection from federal loan default sanctions ended July 1. But more financial and management assistance for HBCUs should be made available, according to a report by Sallie Mae.
SLM Holding Corp., better known as Sallie Mae, is recommending new steps to help HBCUs prevent defaults — and thereby remain eligible for federal grant and loan programs. Yet it also points out that these institutions and their students may need more financial aid after an era of stagnating federal support.
Federal funds for HBCUs “have declined in inflation-adjusted value and have not kept pace with the increases in college costs,” says the study, Supporting the Historically Black College and University Mission, which cites the need for funding increases. The report also says that Congress should consider more money for general student financial aid, since aid after inflation has increased just 4 percent from 1988 to 1998.
But those provisions, while helpful, are simply two ideas to promote a high-priority requirement — that HBCUs do more to curb defaults, particularly after new changes in federal law.
For nearly a decade, HBCUs enjoyed a blanket exemption from federal sanctions that affected other schools with high student-loan default rates. Last year’s Higher Education Act Amendments continued the exemption only through July 1999, after which the government would assess institutions on a case-by-case basis.
In anticipation of the change, Sallie Mae began an HBCU default management project, with special attention to 14 colleges and universities most at risk. “Recently enacted federal laws now threaten” these 14 institutions since they have had default rates above 25 percent for each of the past three years, its report says.
Under federal law, these colleges could lose access to all student aid, grant, and loan programs, making it virtually impossible to serve low-income students. Federal law also requires these institutions to have in place comprehensive default management plans if they want to remain eligible for aid.
The 14 affected institutions are: Allen University, Arkansas Baptist College, Barber-Scotia College, Central State University, Huston-Tillotson College, Jarvis Christian College, Lane College, Mary Holmes College, Miles College, Paul Quinn College, Southwestern Christian College, Texas College, Texas Southern University, and Wiley College.
As part of this initiative, Sallie Mae collected information from all 14 institutions and found that most lacked effective default management strategies. In other cases, entrance and exit counseling was not comprehensive enough, and colleges had insufficient communication between admissions and financial aid offices.
But these institutions and other HBCUs also face special hurdles based on their own finances and the characteristics of their students. For example:
•52 percent of HBCU undergraduates come from families with annual incomes of less than $20,000, compared with 39 percent of students at all four-year colleges and universities.
•HBCUs typically had an endowment of only $4 million, compared with $67 million at the typical four-year college.
•HBCUs generally had low graduation rates and limited access to technology.
To help reduce default problems, Sallie Mae provided a guide for HBCUs when developing default management plans. It also listed loan repayment and collection activities helpful in reducing defaults as well as information colleges could use to improve entrance and exit counseling for borrowers.
More academic advising, an increased emphasis on peer counseling and tutoring, and default management teams made up of major campus leaders are other techniques to help curb defaults, the report says.
HBCU leaders offered support for Sallie Mae’s proposals.
“This valuable study gives us greater insight into the types of tools that HBCUs can use to help reduce student loan default rates,” says William H. Gray III, president and chief executive of The United Negro College Fund.
However, Gray notes, “Sallie Mae’s recommendations cannot be implemented without additional costs to the respective HBCUs.”
The report acknowledges the need for additional funds and technical assistance, Gray says, and such help is essential “to make this default management effort work successfully.”
The 14 institutions in the program already have received some supplemental financial assistance. They will share $275,000 in a grant from Microsoft Corp. for software to better track financial aid records.
The complete Sallie Mae report can be obtained by calling (703) 810-3000.

Ugandan, U.S. Medical Schools
Develop Low Cost AIDS Treatment
The National Institutes of Health announced last month that a joint Uganda-U.S. study has found a highly effective, safe, and inexpensive drug regimen for preventing the transmission of HIV from an infected mother to her newborn.
The research teams that made the discovery were led by Dr. Francis Mmiro, from Makerere University Faculty of Medicine, and Dr. Brooks Jackson, from The Johns Hopkins University School of Medicine. The study was sponsored by the National Institute of Allergy and Infectious Diseases (NIAID).
“This extraordinary finding is the most recent in our efforts to bring an end to AIDS, not only in the United States but in countries around the world,” says Health and Human Services Secretary Donna E. Shalala. “American scientists along with our international partners are committed to developing treatments that not only work, but that are also feasible in other health care settings. These results achieve both those goals.”
According to NIH, results from the study show that a single oral dose of the antiretroviral drug nevirapine (NVP) given to an HIV-infected woman in labor and another to her baby within three days of birth reduces the transmission rate by half compared with a similar short course of AZT. If implemented widely in developing countries, this intervention could prevent some 300,000 to 400,000 newborns per year from beginning life infected with HIV.
Finding affordable interventions for developing countries is considered key to curtailing the global spread of the AIDS epidemic. In parts of sub-Saharan Africa, up to 30 percent of pregnant women are infected with HIV — and 25 to 35 percent of their infants will be born infected, accoding to the NIH. An estimated 1,800 HIV-infected babies are born every day in developing countries.
NIH says that based on average U.S. wholesale prices, the cost of the drug used in the nevirapine regimen in the current study is approximately 200 times cheaper than the long-course AZT used in the United States. And, it is almost 70 times cheaper than a short course of AZT given to the mother during the last month of pregnancy — a regimen tested in Thailand by the Centers for Disease Control and Prevention and reported effective in 1998.
  “The implications of this study for developing countries, where 95 percent of the AIDS epidemic is occurring, are profound,”Jackson says.


Senate Reserves Funds for D.C. Initiative
The U.S. Senate has voted to reserve funds for a new District of Columbia tuition initiative — even though members have yet to agree on a precise plan of action.
Senators agreed to reserve $17 million next year to launch the initiative, through which D.C. students would become eligible for discounted, in-state tuition rates at public colleges and universities outside the District.
The exact reach of the initiative is still unclear, however. A House-passed bill would extend the discounts nationwide, while a Senate plan awaiting action would limit the discounts to colleges in Maryland and Virginia.
The Senate reserved the money in its fiscal year 2000 D.C. spending bill approved just before Congress’ July 4 recess. The bill takes no position on the structure of the program. Congress would have to make that decision in a final bill later this year.
The D.C. issue also has implications for historically Black colleges and universities, since both the House and Senate bills would affect the status of the University of the District of Columbia, a public institution that serves as the district’s main source of public higher education. Both bills would give UDC status as an HBCU so it could receive funds under Title III of the Higher Education Act. However, sponsors have requested that UDC get aid through the tuition discount bill so that its eligibility for Title III funds would not cause other HBCUs to lose federal money. 

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