3 years ago
Student loan forgiveness is the hot topic, especially when the discussion is getting heated around funding cuts. However, this time the news is quite the opposite. It has become known that the U.S. Education Department is granting full forgiveness of $322M million in loans to 4 historically black colleges and universities suffered from Hurricanes Katrina and Rita in 2005.
Betsy DeVos commented on the Department’s decision, saying “this additional disaster relief will lift a huge burden and enable the four HBCUs to continue their focus on serving their students and communities.” The choice of educational institutions subject to student loan forgiveness is not accidental. In 2007, Dillard University, Southern University at New Orleans, Tougaloo College and Xavier University of Louisiana collectively borrowed over $360M through the HBCU Capital Financing Program.
Making Student Loan Forgiveness Possible
However, in the light of the tragic events, the funds were used to renovate the affected areas and refinance the existing debt. The schools failed to repay the debt due to depressed enrollment, so in 2013 they received a 5-year payment deferment set to expire this spring. Owing to the provision in the 2-year budget deal signed into law, the education secretary got freedom of action to forgive the balance owed by the 4 schools.
Source: Jackson Free Press
The HBCU Capital Financing Program started in 1992 to provide low-cost funding to historically black institutions to make a basic campus upgrade and refinance the existing debt. The financing program helps the schools challenged by the inability to access traditional financing at reasonable rates. As of today, the US Department of Education has approved over $2B in loans to a total of 45 historically black colleges.
President Trump jeopardized the future of the program last May calling its constitutionality in question. The statement signed by POTUS made everyone involved in higher education wonder if the program was coming to its end. However, the White House said the statement was meant to preserve Trump’s legal options in the future.
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