What Is the Financial Future of HBCUs?

Historically Black colleges and universities (HBCUs) have faced a relative lack of access to financial and social capital since their inception.

To try and address inequities in funding allocation, Congress recently passed several spending bills — including the CARES Act — to help invest in HBCUs. The recent attention given to rebuilding the financial infrastructure of HBCUs is promising. And the recent ban on affirmative action begs the question: Will enrollment numbers increase at HBCUs?

History shows a prolonged trend of disinvestment in HBCUs since their founding. The first piece of federal legislation that recognized and supported HBCUs was the Agricultural Act of 1890, known as the Second Morrill Act.

This act outlined that land-grant institutions, including some HBCUs, would receive an appropriation from the federal government, as well as a one-to-one match from their respective state governments.

Over time, given the lack of accountability and the belief that HBCUs were “lesser than,” many states refused to provide their one-to-one match to HBCUs within their borders.

In 1944, the United Negro College Fund — a private organization — began providing financial aid to Black college students. It also committed to improving the financial stability of private Black colleges and universities.

Targeted federal legislation to support HBCUs did not occur again until 1986. That year, the Higher Education Act Title III Part B authorized federal re-investment in and strengthening of HBCUs’ development offices, endowment funds, academic resources, and student services.

Unfortunately, the American Council on Education reported that HBCUs again saw declines in federal funding per full-time equivalent student between 2003 and 2015 as compared to non-HBCU schools.

There have been major disparities in the state funding of land-grant HBCUs in the past three decades. Just recently, the Secretary of Education and the Secretary of Agriculture sent joint letters to the governors of 16 states that were found to underfund land-grant HBCUs.

According to the letters, four states underfunded HBCUs by between $1.1 billion and $2.1 billion. HBCUs in 12 states were underfunded by $172 million to $852.6 million. The letters indicate how much each land-grant HBCU was underfunded and encourage states to take proactive steps to rectify these major funding inadequacies.

Larger state schools and elite private institutions have been able to establish a sizable donor base. HBCU alumni also donate money to their alma maters. However, due to the relative lack of federal funding for HBCUs, these alumni gifts are typically spent on capital improvements rather than put into endowments.

HBCUs typically accept and enroll more students from families with lower incomes than non-HBCUs. With decreased funding and declining enrollment, it is challenging for many students to attend HBCUs without taking on excessive loan debt.

Federal Pell Grants have been the largest source of funding for income-eligible students. However, contributions to this grant program have declined substantially since 2013.

To bridge funding gaps, students who attend HBCUs borrow more money at a higher rate. They also graduate with more debt than their peers at non-HBCU institutions. For students of color, excessive loan debt only serves to widen the racial wealth gap.

Student debt can present challenges as a person tries to generate wealth, buy a home, start a family, and achieve economic security after graduation.

The 2011 changes to the Parent PLUS Loan had an impact on student persistence at HBCUs. The U.S. Department of Education stipulated that applicants who had accounts in collection within the last five years were ineligible to be approved for Parent PLUS loans — previously, this window was just the last 90 days.

These changes led many parents and guardians of students attending HBCUs to be rejected for college loans. HBCUs lost an estimated $168 million as a result of the large number of students who were no longer able to start or finish their college education.

With changes to federal funding and limited loan choices for Black families, students who want to attend and graduate from HBCUs must often put themselves in significant debt to finance their education.

In the midst of the COVID-19 pandemic, the U.S. Department of Education used the Higher Education Emergency Relief Fund to assist under-resourced colleges. HBCUs across the country received massive funding of $2.6 billion, which allowed institutions to clear the balances of thousands of students. This was significant in erasing student loan debt.

In the face of the Supreme Court ruling to ban affirmative action as consideration for admission to colleges and universities in June 2023, HBCUs are preparing for an influx of applications. Clark Atlanta University reported that they received 26,000 applications for fall 2023, while they had less than 1,100 spaces for incoming students. Howard University, located in Washington, D.C., had an enrollment of 9,399 in 2019, which increased to nearly 13,000 students by 2022.

Adequate funding of HBCUs is essential in order to accommodate the increasing number of students who are seeking an excellent education in a culturally rich environment where they are valued and expected to be successful in their endeavors.