By John Schmid, Special to the AFRO
With the resignation of the White House’s chief enforcer of consumer protection for student loan receivers Monday, uncertainty mounts as to how students and their parents will finance the education of millions of Americans during the Trump administration.
“Each year, tens of millions of student loan borrowers struggle to stay afloat,” wrote Seth Frotman, Assistant Director and Student Loan Ombudsman of the Consumer Protection Financial Bureau (CPFB), in his August 27 letter of resignation. “For many, the CFPB has served as a lifeline–cutting through red tape, demanding systematic reforms when borrowers are harmed and serving as the primary financial regulator tasked with holding student loan companies accountable when they break the law.”
Frotman, whose resignation becomes effective September 1, oversaw a $1.5 trillion industry and has taken issue with the Trump administrations “undercutting enforcement of the law,” “undermining the Bureau’s independence,” and “shielding bad actors from scrutiny,” he wrote in the same letter.
“The damage you have done to the Bureau betrays these families and sacrifices the financial futures of millions of Americans in communities across the country,” the letter, addressed to acting CFPB director Mick Mulvaney and CCed to Secretary of the Treasury Steve Mnuchin and Secretary of Education Betsy DeVos, concluded.
The announcement comes simultaneously with a troubling study of HBCUs from the Journal of Financial Economics (JFE).
HBCUs seeking to finance infrastructure, be it repairs, renovation or new construction, cannot always rely on their state governments for sufficient appropriations of tax dollars. So they might issue bonds on the public private market to cover the shortfall.
The JFE study concludes that the significantly increased interest rate, service charges, and management fees HBCUs pay for capital are best explained by the racist “tastes” of investors.
In the best case scenario, these excessive surcharges on these nevertheless AAA-rated borrowers (a control in the study), become a tax burden on the HBCUs’ home state. But with the understanding that the need for private capital is already premised on a shortfall in public funds, it becomes clear that a not insignificant burden will fall on students and their parents in the form of rising tuition costs.
One public HBCU, Fayetteville State University (FSU), a member of the University of North Carolina System and Thurgood Marshall College Fund, continuously rates as one of, if not the, most affordable HBCUs in the country, according to an August 27 study by studentloanhero.com.
Rebecca Safier, the author of the study, calculated FSU’s in-state tuition to be $5,183, ranking second on its top-five list.
For comparison to other HBCUs in the DMV area, D.C.’s University of the District of Columbia has an annual in-state tuition of $5,756; it ranks 18th on Student Loan Hero’s list. Morgan State University, Baltimore, has an annual in-state tuition of $7,766 and ranks 39th. Virginia State University, Petersburg, has an annual in-state tuition of $8,726 and ranks 49th. Howard University, D.C., has the third-most expensive tuition on Student Loan Hero’s list. Its tuition is $25,697 annually.
“For the second straight year, we’ve been identified as a school and university with the lowest net price, one of the lowest net costs,” Dr. Jon Young, FSU’s Vice Chancellor, Chief of Staff and former Provost, told the AFRO. “What ‘net costs’ refers to is the amount students pay after all of financial aid awards have been applied.”
Since the recession, tuition at FSU has gone up as state appropriations have gone down, Dr. Young said. He says he and FSU have a “moral responsibility to prevent our students from taking out excessive loans.”
“I’ve been here for a number of years now, so we’re very, very, aware of the fact that the majority of our students come from low-income backgrounds and we make a concerted effort to keep our tuition and fees as low as we possibly can,” Dr. Young said. “Our financial aid office is very aggressive in trying to apply, as far as they possibly can, all of our federal, state and institutional aid we have to reduce the out of pocket costs for students.”
Even with infrastructure needs, “our biggest need, right now,” Dr. Young doesn’t anticipate experiencing the exact kind of trouble outlined in the JFE study for two reasons:
“We’ve just gone through our credit ratings and the ratings agencies,” Dr Young said. “We have one that’s A plus and one that’s A minus, both of those have remained constant and both agencies have said that our situation has remained stable. I think that the fact that we’re a state institution and the fact that North Carolina, compared to a lot of other states is, even despite cuts during the recession, remains one of the most generous states in terms of higher education. I think that really helps us a lot.”
Still, FSU maintains a state of “vigilance,” especially as state officials will now be reacting to the federal court order to redistrict, Dr. Young says.
“In Washington, we continue to monitor to make sure we’re preparing for negative impact on us,” Young said. “We also have a fairly volatile situation in North Carolina right now. We’ve got a Democratic governor with a Republican legislature with a veto-proof majority. … We’re hopeful that the changes in Raleigh, the state, will be to our advantage and to the nation as well, but certainly we hope that November will bring some changes in the state’s political dynamics that should be helpful to us.”