New legislation introduced on Capitol Hill would make it easier for HBCUs to garner capital through bonds by lowering borrowing fees on those loans.

Congressional Black Caucus member Rep. Keith Ellison, D-Minn

Congressional Black Caucus member Rep. Keith Ellison, D-Minn

The HBCU Investment Expansion Act would allow municipal bonds issued by HBCUs to be tax-exempt at the local, state, and federal levels. It was introduced in response to a study released earlier this year that showed disparities in the underwriter fees paid by HBCUs and predominantly-White institutions with the same debt ratings.

“We all know how important our HBCUs are, and why they’re important,” said Congressional Black Caucus member Rep. Keith Ellison, D-Minn., who introduced the bill. “They offer a place for students to get an excellent education and set themselves up for success. Unfortunately, that costs money. While HBCUs are able to raise money by issuing bonds, researchers found that these universities face higher costs compared to other universities trying to raise funds with bonds. That’s not right. This legislation will level the playing field and help HBCUs get the funds they need to build new dorms, labs or classrooms without additional costs or fees.”

According to the report, originally detailed by the AFRO in April, HBCUs pay 15 to 20 percent more in fees—an average of about $50,000—for bonds compared to their White ounterparts.

That’s a lot to lose for institutions already juggling limited resources, HBCU officials said at the time. And officials said the new legislation would help staunch the bleed.
“UNCF (United Negro College Fund) and our 37-member institutions stand in full support of the HBCU Investment Expansion Act and we applaud Congressman Ellison’s strong leadership in crafting this legislation,” UNCF Senior Vice President of Public Policy and Government Affairs Cheryl L. Smith said in a statement.  “This innovative bill will help redress recently revealed and grievous inequities that HBCUs face in accessing financing in the private bond markets for critical infrastructure projects.  We urge its swift passage by the Congress.”

Zenitha Prince

Special to the AFRO