Washington
As the dust settles on the yearlong battle to overhaul the nation's student-loan system, the more than 1,200 colleges that serve predominantly minority populations have emerged as some of the biggest winners.
The institutions, which represent about 13 percent of all U.S. undergraduates, got the second-biggest pot of money for education, behind only Pell Grants, in the recently enacted student-loan bill. Their $2.5-billion allocation exceeded even the $2-billion set aside for community colleges, which serve close to half of all undergraduates and have been identified by President Obama as the centerpiece of his strategy for improving the nation's performance on college completion.
On one level, the reasons that minority-serving institutions fared so well may be straightforward. They are among the nation's most financially challenged colleges, and advocates describe their need for help as dire at a time of national economic distress.
"The institutions needed these dollars more than ever before," said Michael L. Lomax, president of the United Negro College Fund.
But amid all the political, budgetary, and educational trade-offs surrounding the decision by Congress to end the bank-based system of distributing federally subsidized student loans, and return the proceeds to educational programs, minority-serving institutions may also have benefited from a more complex set of calculations.
And much of that benefit may be due to the fact that many historically black colleges, Hispanic-serving institutions, and their allies stood for years alongside private-loan companies in their fight against Democrats' attempts to end the bank-based loan program, making them a crucial constituency to satisfy politically.
"We just held the line," Mr. Lomax says, describing a unified position among various minority-serving institutions demanding that their needs be taken care of in the bill. "We just had a very strong case that we were able to make, and it proved to be compelling."
College administrators like Alexei G. Matveev, director of the Quality Enhancement and Critical Thinking Studies program at Norfolk State University, a historically black college in Virginia, said there is certainly a real need for the money.
He wants to apply for some of the money from the new law to expand a summer program that gives first-generation students at Norfolk State exposure to the type of work habits expected at the college level.
The free program of supplemental courses and social support began three years ago with 50 students who were considered at risk of dropping out. By last year it had grown to 130 students, Mr. Matveev says. More than 90 percent of the program's students stay enrolled for the following fall semester, besting Norfolk State's overall retention rate of 70 percent.
More support could help the program eventually reach 600 students each summer, Mr. Matveev says. "It's a very good example of how additional federal money can help the university, by scaling up a program that is clearly working."
Long-standing Ties
The political friendship between the loan companies and minority-serving institutions stemmed largely from the fact that the lenders routinely spent some of their federal subsidy dollars to help colleges manage their operations, providing them with benefits such as computer equipment and printing services. That help meant the most to colleges with less money and smaller endowments.
"Small institutions usually are very thinly staffed, particularly in the financial-aid offices," Donald K. Murphy, chief executive of the Wesley Peachtree Group, an Atlanta-based accounting firm that represents dozens of historically black colleges, said last November in urging Congress to reject the student-loan bill.
Assisting financial-aid offices was just one way that the loan companies won friends among minority-serving colleges. Sallie Mae, the nation's largest student-loan provider, gave out more than $15-million in scholarships this past decade, with an emphasis on helping minority students. USA Funds, the largest of the guarantee agencies (which largely collect and transmit fees) in the bank-based student-loan system, last year handed out more than $3-million in scholarships.
Sallie Mae also spent $5.8-million in 2008 and the first half of 2009 on lobbying Congress, according to a Chronicle analysis. Past strategy documents from the company have shown that its lobbying efforts have paid particular attention to wooing minority-serving institutions and members of the Congressional Black Caucus. The company's lobbyists emphasized advantages such as the attention paid by private lenders to default prevention, given that colleges can lose eligibility for federal aid if too many of their students fail to pay back their loans.
The Education Department, in a recent study using 2007 figures, found that 18.5 percent of borrowers from historically black institutions defaulted on federally subsidized loans within three years of leaving college. That compares with the nationwide average of 11.8 percent.
One Sallie Mae strategy paper, from 2006, mentioned what the company considered a "coalition building" meeting held that year with Mr. Lomax. A few months later, the United Negro College Fund joined the Thurgood Marshall College Fund and the National Association for Equal Opportunity in Higher Education in urging Democrats to temper their plans to impose tougher regulations on the bank-based system.
There are also personal ties between historically black colleges and loan companies. For example, Marshall C. Grigsby, a former higher-education-policy adviser to Rep. William L. Clay, a Democrat of Missouri and a founder of the Congressional Black Caucus, became a trustee of USA Funds the year after he left Capitol Hill. William A. Blakey, Washington counsel to the Thurgood Marshall College Fund, formed a law practice in 1998 with John E. Dean, a lawyer and lobbyist on student-loan issues for the Consumer Bankers Association.
Changed Views
Support for the banking industry among minority-serving colleges may be receding, however, particularly now that Congress has directed $2.5-billion to the colleges from the savings generated by moving to 100-percent direct lending. Of that sum, $1-billion will go to pay for facilities and programs to help Hispanic students who major in math or the sciences at community colleges transfer to four-year institutions. And $850-million will go to historically black colleges, which can spend it largely at their discretion.
Democrats also included $50-million in the bill to help colleges nationwide make the transition to the direct-lending system, after leaders of minority-serving institutions wrote to lawmakers complaining of the potential costs of the switch.
Some Hispanic-serving institutions defended the bank-based system because of the convenience and the sense of familiarity, says Antonio R. Flores, president and chief executive officer of the Hispanic Association of Colleges and Universities.
Now, however, the change clearly appears "best for our students and our institutions," given the money coming their way, he says. "It was a no-brainer, because the funding had to come from somewhere."
While the United Negro College Fund never directly endorsed the bank-based system, many of the nation's 105 historically black colleges and their students experienced years of "aggressive" marketing by the loan companies, aimed at winning their support in political battles in Congress, Mr. Lomax said last week.
Congress had to cut more than $40-billion in education spending from the original version of the student-loan bill, which passed the House of Representatives in September, since official estimates of the measure's savings had fallen over time. Of the spending specified in the original version, only the $2.5-billion for minority-serving colleges remained untouched in the final bill.
Last week, Obama-administration officials, explaining the generous treatment of those colleges in the new law, said it is important to provide money to help them thrive because they enroll and graduate large portions of the nation's minority students, who are underrepresented in higher education.
Education Secretary Arne Duncan noted that historically black colleges have produced half of the nation's black teachers. Minority-serving institutions, he said, are vital to meeting Mr. Obama's goal for the United States to be No. 1 in the world by 2020 in measures of college completion.
Cassandra Dorsey, a senior communications major at Bowie State University, a historically black college 20 miles east of the White House, says she is "really appreciative" of the work done by Mr. Obama and Democrats in Congress to pass a bill that includes money to give institutions like hers a needed boost.
Nevertheless, she doesn't see the legislation changing things for her personally, or making it much easier for people in situations like hers to complete college. A single mother with an 11-year-old daughter, she has $20,000 in college debt and no job waiting for her after graduation next month.
"A lot of that stuff does not apply to me," Ms. Dorsey says of the benefits in the student-loan bill. "So I'm still stuck."
Richard K. Vedder, director of the Center for College Affordability and Productivity and a professor of economics at Ohio University, also questions how much of a difference the student-loan bill's education spending will make and whether the money is being directed to the right priorities.
To meet broad policy goals, such as the president's college-completion benchmark, the government might consider giving more money to students of any income level and at any college, who demonstrate the greatest likelihood of completing a degree, Mr. Vedder says. Doing so, he argues, would stand a better chance of significantly improving the nation's record on graduation than increasing spending, as the student-loan legislation does, on low-income students through Pell Grants and on low-performing minority-oriented colleges.
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