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Washington UPDATE

ED Backs Continued Default-Rate Exemption for HBCUs

The U.S. Department of Education (ED) has asked Congress to extend
the current exemption from default-rate penalties for historically
Black colleges and universities.

HBCUs and tribally controlled colleges are exempt from the penalty
framework, through which ED can deny access to loans and grants for
students who attend schools with high default rates.

Under ED’s plan, the exemption would continue through the year
2000. At that point, exemptions would continue for those institutions
“showing improvement in their default rates.”

Supporters of HBCUs and tribal colleges have called the exemption
essential for institutions that serve a large number of low-income,
disadvantaged students. Past studies have shown that many HBCUs would
face default sanctions without the exemption.

However, the proposed change could leave some HBCUs vulnerable to
default penalties if they fail to demonstrate progress, based on ED’s
draft. Those that face sanctions also may encounter a new default
penalty system, if ED gets its way.

Another change sought by the department would cut the number of
ways a school could face default penalties from two to one. Under the
new plan, schools could lose access to all financial aid — including
grants and loans — for three-year default rates in excess of 25

Under current law, schools with default rates above 25 percent for
three consecutive years could lose access to loans. Schools could lose
access to both grants and loans only for one-year default rates of 40
percent or more.

That change already faces criticism from some in higher education, including community colleges.

“We oppose any effort to link loss of loan eligibility with loss of
eligibility for other programs,” said Noah Brown, legislative director
for the Association of Community College Trustees. Two-year college
leaders have long criticized the existing system for hurting colleges
with low tuitions and few borrowers.

The default penalty provisions are one part of a massive ED plan to
reauthorize the Higher Education Act. Another change would limit the
period over which a student could receive a Pell Grant. Under the
change, a full-time student at a four-year college could receive grants
for no longer than six years.

“We have one student who has received Pell Grants for nineteen
years.” said David Longanecker, assistant ED secretary for
postsecondary education. “It’s a statistic that really harms the
credibility of the program.”

Other ED proposals would reduce financial-aid paperwork for
students, cut. loan origination fees, simplify rules for the
Supplemental Educational Opportunity Grants program, and raise earned
income limits to help more independent students qualify for financial

Bill Would Expand HIS, Tribal and HBCU Funding

A congressional draft bill for Title III of the Higher Education
Act (HEA) would expand funding for Hispanic-serving institutions (HSI)
and tribal colleges and permit more historically Black graduate
institutions to get federal aid.

Circulated in Washington, D.C., the draft would not grant HSIs and
tribal institutions separate new sections of Title III. However, it
would give them access to new federal funds and give these institutions
flexibility in spending these dollars.

The bill would authorize $80 million for HSIs, up from the current
$45 million. It also would simplify the system for institutions to
qualify as an HSI, removing requirements for a specific percentage of
students to be their family’s first generation in college.

The draft defines an HSI as an institution where Hispanics
represent at least 25 percent of enrolled students and half of all
Hispanics are from low-income households.

Hispanic graduate institutions also could receive aid under the draft proposal.

Tribal colleges would join Title III for the first time under the
draft bill, which authorizes $10 million for this activity in 1999.
Colleges could use funds in a variety of areas such as equipment,
construction and renovation of facilities, faculty exchanges, library
enhancements, and academic instruction in areas where American Indians
are under-represented.

Despite the authorizations, HSIs and tribal colleges still would
need annual allotments of funds through the appropriations process. An
authorization sets a maximum ceiling for an activity and permits
Congress to allocate federal funds for that purpose.

Congress often does not come close to matching authorization levels
during the appropriations process. For example, HSIs have received only
about $12 million a year, despite their current $45 million
authorization level.

The authorization for HBCUs would remain at $135 million for
undergraduate programs, while the authorization for HBCU graduate
institutions would increase to $35 million from $20 million. The draft
bill also would add academic disciplines at Norfolk State University
and Tennessee State University to the list of graduate programs
eligible for funds.

The HBCU program would continue as Part B of Title III.

The bill was scheduled to go before a House of Representatives
committee for debate in early March. The Senate has said it will not
begin HEA work in earnest until after the House completes action.

More Students Borrowing for College

The number of African American and Hispanic college seniors who
borrowed money to pay for college increased from 1992 to 1996, says a
new study from the U.S. General Accounting Office (GAO).

Nearly 76 percent of African American seniors and 73 percent of
Hispanic seniors said they borrowed money for college for the 1995-96
school year. The corresponding rates were 61 percent for African
Americans and 56.5 percent for Hispanics back in 1992-93, GAO said.

White and Asian American seniors also were more likely to borrow in
1996, although both had a lower percentage of students in loan
programs. About 58 percent of White seniors and 53 percent of Asian
seniors borrowed money, based on the 1995-96 figures. The rates were 45
percent and 38 percent, respectively, in 1992-93.

Overall, slightly more than half of all college students — 52
percent — borrowed money to pay for college in 1995-96. The rate was
41 percent for 1992-93.

All four groups reported borrowing more money in 1995-96 compared
to 1992-93. The average borrowing among African Americans increased
from $9,489 to $14,246, while borrowing for Hispanics rose from $8,146
to $11,910.

More college students in each group also worked to help pay for college in 1995-96 than they did previously.

For more information about the study, Higher Education: Students
Have Increased Borrowing and Working to Help Pay Higher Tuitions,
GAO/HEHS-98-63, contact the GAO at P.O. Box 37050, Washington, DC,
20013; or call (202) 512-6000.

COPYRIGHT 1998 Cox, Matthews & Associates

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