Dozens of students lined the hallways outside the financial-aid office here at Morgan State University on a Wednesday in late September. Nearly a month after fall classes had started, the students were in this former hospital desperate to find a way to pay their bills.
Until then, the few hundred students who had yet to pay the balance for this semester had been allowed to go to class. But that day, as they faced having to withdraw, Morgan State was holding "reinstatement day" to advise them on how they could come up with the money to stay enrolled. Waiting to speak with financial-aid counselors, some students compared situations, while others frantically called their parents. Signs along the hallways read: "There Are No More On-Campus Work Study Positions Available Until Further Notice."
Among the students waiting were some whose parents had been denied a PLUS loan, federal aid to help finance children's college costs. A tightening of the loan program's eligibility criteria two years ago has hit historically black colleges like this one especially hard, as they serve many students who rely on the loan, and a considerable share whose families no longer qualify. Seeing enrollment declines, some colleges have formed a coalition to protest the change. Students, meanwhile, have had to drop out or scramble to find other forms of financing.
At Morgan State, students' families received about $4-million less in PLUS loans this year than they did in 2012, said Tanya Wilkerson, director of financial aid. "We've really taken a hit with the new changes," she said between advising students on reinstatement day. "It's just been a big ordeal for us with our students not being able to meet the gap," she said, "especially for those who have been eligible for the parent PLUS loan in the past."
U.S. Education Secretary Arne Duncan apologized to historically black colleges last month for what he called poor communication by the department on the changes in loan eligibility. Until 2011, applicants were approved for a PLUS loan as long as they were not more than 90 days delinquent on any debt, and did not have any foreclosures, bankruptcies, tax liens, wage garnishments, or student-loan defaults in the past five years. Under the new standards, unpaid debts in collection and student loans written off as unpayable in the previous five years also count against applicants.
Leaders of historically black colleges and in the African-American community are lobbying the Education Department to change the standards back, arguing that there was no evidence of high default rates on parents' PLUS loans.
The department, which does not track defaults for the PLUS program, has said the changes bring its credit standards in line with those of other federal loan programs and ensure that parents are not taking out loans they can't afford to pay back. Still, the department said it would reconsider the PLUS loan approval criteria in a spring rule-making session.
For now, Morgan State, like other historically black colleges, is trying to keep students enrolled. In August, university officials held an emergency fund-raising drive, aiming to bring in $300,000 for 300 students whose parents had been denied PLUS loans and needed funds for this fall.
"It was a stretch goal for us, because we were trying to raise this money in a short period of time," says David Wilson, Morgan State's president.
The drive ended up yielding just under $100,000, and 100 students were each awarded a $1,000 scholarship.
"That's 100 fewer students," Mr. Wilson says, "that we have to send home."
The students who had come up short this semester included many juniors and seniors who were denied aid they'd received in the past, says Alvin Hill, president of the university's student government. He should know. A senior planning to graduate next May, he was here on reinstatement day to pay his balance.
Over the summer, Mr. Hill's parents were denied a PLUS loan. But he says he has a good network of support and should be able to pull together the funds to stay enrolled.
"I'm more confident that I'll be here," he says. "But I have the opportunity to talk to students every day who just don't know."
From March through September of this year, more than 60,000 parents applying for PLUS loans for students at historically black colleges were denied, a denial rate of 70 percent, according to data from the Education Department. Before the tightening of eligibility criteria, that rate hovered between 40 and 50 percent, says Cameron French, a spokesman for the Education Department.
Students whose parents are denied the PLUS loan automatically qualify for more in unsubsidized Stafford loans. Unlike with parent PLUS loans, however, which have no cap, students can borrow only up to a certain amount in additional federal loans.
In response to the outcry from historically black colleges, the federal agency revamped its appeals process for PLUS loans this year. Both colleges and applicants are now notified if they are eligible for an appeal. Parents who received a PLUS loan under the old guidelines are reconsidered, as are applicants whose outstanding debt is under a "predetermined limit," according to Mr. French.
About a third of the applicants from historically black colleges denied this year were eligible to appeal. Of those, 38 percent, or just over 8,000 applicants, filed for reconsideration. Virtually all of them—98.5 percent—were then approved for a PLUS loan.
The tweaks in the reconsideration process are not enough, however, for the coalition of colleges and advocacy groups that is threatening to sue the Education Department over the changes in the PLUS program. They contend that the tighter eligibility criteria have directly led to sharp declines in enrollment and revenue for historically black institutions.
For some students, the unexpected denial of a PLUS loan has been devastating. Thomas Hundley Jr., 22, from Cherry Hill, N.J., was on track to graduate from Howard University next May. His mother, a health-services administrator, had borrowed $30,000 in PLUS loans before the policy change, Mr. Hundley says. In the spring of 2012, Ms. Hundley, a widow with five children, was denied a PLUS loan for the first time.
She appealed but was unsuccessful. Unable to find another way to pay the balance he owed Howard, Mr. Hundley, a political-science major with a 3.5 grade-point average, had to withdraw.
"I see everyone else who is graduating," he says. "I'm not able to be a part of that."
Howard provided $88-million in aid for its students this year, up from $58-million in 2008, says Wayne A.I. Frederick, the provost. But with the cost of attendance now more than $40,000, that sum can't cover everybody, and students like Mr. Hundley often need more than institutional aid.
"The PLUS-loan accessibility is something that we continue to monitor closely," Mr. Frederick says. "We remain concerned and watchful."
Applications for PLUS loans for Howard students have dropped 20 percent in the past two years, the provost says. More students and parents are instead taking out private loans, which tend to have higher interest rates, he says. Enrollment had dropped at Howard but bounced back this fall.
Mr. Hundley, who is working full time at a law firm and considering a second job, hopes to return in the spring. He has raised $13,500 in donations, much of it coming after he was the subject of a Philadelphia Inquirer column. His mother, aunts, and sisters also held a fund-raising dinner last month, and he has a crowdfunding page online.
"I definitely think that I deserve to be in my school, and I deserve to finish," Mr. Hundley says. "I just got tripped up along the way."
Looking for Options
For students who want to stay here at Morgan State this semester, time is running short. The financial-aid office will continue to work with students past reinstatement day on a case-by-case basis, as the university tries to retain any it can. Morgan State's head count is down to 7,192 students, including those who have yet to pay their bills, according to data provided by the university. Its total enrollment last fall was nearly 8,000.
Latasha Augustus, a sophomore, was here on reinstatement day as an assistant in the financial-aid office, a work-study job to help pay for her education. Her parents had been denied a PLUS loan this year as they deal with mortgage payments, she said. A political-science major with aspirations of becoming a judge, Ms. Augustus was one lucky recipient of a $1,000 scholarship after the fund-raising drive in August.
Morgan State's student government is also working to help students who need aid, particularly upperclassmen close to graduation, says Mr. Hill. One resolution, he says, would put 10 percent of the student government's budget toward a scholarship fund for graduating seniors.
With three semesters left until graduation, Sean Bruce was unsure last month how he would cover the $1,800 he owed for this fall.
"It's just kind of stressful," he said outside the financial-aid office. "I'm almost done, and now I have to go through this."
Studying hospitality management, Mr. Bruce hopes one day to run his own hotel. But he had just been denied a private loan from Sallie Mae, one he said he'd borrowed before. He didn't think his mother would qualify for a PLUS loan.
But then a financial-aid counselor told him that if she got denied, he would be eligible for more in unsubsidized federal student loans. He sat down at one of four computers in the student-loan office, just down the hall from financial aid. The reminder "Know Your Money, Know Your Debt" sprawled out in cut-out letters on the wall above him.
Mr. Bruce took his phone out of his pocket and called his mother. "Hey, Ma," he said, "I need your social so you can get denied this PLUS loan."
Less than a half-hour after starting the application process, Mr. Bruce's mother had been denied, and he became eligible for $4,000 more in student loans for this academic year.
He felt better than before, he said, but he still had to return to the financial-aid office the next day to sort out his bill. "We'll see about tomorrow."