HBCUs Have High Loan Default Rates

December 2, 2013

By Ireti Adesanya

Among Virginia institutions of higher education offering graduate degrees, historically black colleges or universities, or HBCUs, had the highest student loan default rates in 2011.

According to data released by the U.S. Department of Education in September, the four-year schools with the highest loan default rates in Virginia were all HBCUs:

  • Virginia Union University in Richmond – 20.8 percent
  • Norfolk State University – 17.1 percent
  • Virginia University of Lynchburg – 15.6 percent
  • Virginia State University – 10.5 percent

Virginia has 38 colleges and universities that offer not only bachelor’s degrees but also master’s or doctoral degrees. They range from public schools like VCU, to private schools like Liberty University in Lynchburg, to proprietary schools like ECPI University in Virginia Beach. Combined, those institutions had a default rate of 5.1 percent in 2011, an analysis of the data showed.

Virginia’s HBCUs also had some of the biggest increases in student loan default rates from 2010 to 2011. The rate for Virginia University of Lynchburg jumped 13 percentage points; Virginia Union’s rate, 5.5 percentage points; and Norfolk State’s rate, 4 percentage points.

Not every HBCU in Virginia had such high default rates or big increases. Hampton University’s default rate, for example, dropped – from 8.9 percent in 2010 to 6.7 percent in 2011.

Every year, the U.S. Department of Education calculates the default rates of students at each university participating in the federal student aid program. The rate reflects the percentage of students who defaulted on their loans two years after graduation.

If a university’s student loan default rate exceeds 25 percent for three years, it will lose funding from the federal student aid program. The program allows universities to offer students loans to pay for tuition and other expenses, which are a college’s bread and butter.

HBCUs have high default rates because they typically attract students from lower socioeconomic backgrounds – students who often are the first in their families to attend college. Experts say two factors lead to high default rates: Students who get low grades tend to drop out; and because they come from families with few resources to repay loans, they default.

HBCUs across the country are facing similar default rates as Virginia. In Texas, six HBCUs have managed lower their default rates by creating individual counseling sessions for students on loan repayments and mailing students reminders on when to payback their loans.

This article is a “Data Drop brief” — a quick-hit posting based on analysis by students in MASC 644 Computer-Assisted Reporting. This exercise focused on using Microsoft Access, a database manager, to select records from a large data set and sort them. The student also used the free tool Datawrapper to create an embeddable chart.