By Melissa Korn
Four historically black colleges that have struggled to repay hundreds of millions of dollars in Education Department loans from 2007 may have most of the debt wiped clean, thanks to a quiet gift tucked into the two-year budget deal President Donald Trump signed last week.
Dillard University, Xavier University of Louisiana and Southern University at New Orleans, all in New Orleans, as well as Tougaloo College in Jackson, Miss., took out more than $360 million in loans under the HBCU Capital Financing Program to help rebuild after Hurricanes Katrina and Rita. The loans were capped at 1% interest over 30 years.
Under the budget deal, the Education Secretary can forgive any outstanding balance owed by those four institutions.
The HBCU Capital Financing Program, created in 1992 to help historically black colleges upgrade campuses or refinance debt, has struggled for years with repayment and oversight issues. Two institutions -- Barber-Scotia College in Concord, N.C., and Stillman College in Tuscaloosa, Ala -- have defaulted, with dozens more making irregular payments. In total, the Education Department has approved nearly $2 billion in loans.
The four schools hit by Katrina and Rita received a five-year reprieve on their debt when enrollments didn't rebound; the forbearance period is set to expire this spring.
As of last summer, they had repaid roughly $12.4 million of the $361 million they took out, according to a calculation made by The Wall Street Journal.
Dillard was approved in 2007 for a $160 million loan, while Xavier could get up to $165 million, Southern up to $44 million, and Tougaloo up to $28.6 million. They received the money to renovate buildings, build new academic and student housing facilities, refinance debt and reimburse themselves for remediation and rehabilitation after the storms.
Some schools borrowed less than the maximum for which they were approved.
"We are blessed," C. Reynold Verret, president of Xavier University of Louisiana, said Monday. He said the school has $140 million outstanding on its loan. While it could have managed the payments again for at least the first year after forbearance ended, he added, they would eventually become "an existential burden."
Dr. Verret said the four schools had been working for years with officials from the Education Department and Office of Management and Budget to recalculate the value of the loans outstanding, and with Congress for debt relief.
"This was a long time coming," said Walter M. Kimbrough, Dillard's president. He said many school leaders had believed from the start that the Katrina-related funds would be treated as grants, rather than as loans, to recover from the "catastrophic natural disaster."
The Trump administration has struggled to win deep support from some leaders of historically black schools. A February 2017 Oval Office meeting with HBCU presidents was overshadowed was by an image of presidential adviser Kellyanne Conway sitting casually with her feet on a couch, and the White House took months to name the head of its new initiative on HBCUs.
Weeks into her tenure as education secretary, Mrs. DeVos absorbed criticism for calling historically black colleges "real pioneers" of school choice. The institutions were established beginning in the mid-1800s to offer instruction to black Americans who weren't allowed to enroll elsewhere.
Rep. Cedric L. Richmond (D., La.), who is chairman of the Congressional Black Caucus and whose district is home to the three New Orleans universities, said the provision "lifts a major financial burden to schools who have continued to serve their critical missions while continuing to recover from one of the worst disasters in history."
Representatives from Southern University at New Orleans, Tougaloo and the Education Department didn't immediately respond to requests for comment on the potential loan forgiveness.
Write to Melissa Korn at email@example.com
(END) Dow Jones Newswires
February 13, 2018 07:14 ET (12:14 GMT)
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