Howard University’s Credit Rating Downgraded Due to Declining Revenue

by admin | September 25, 2013 9:35 am

howard university 2[1]

by Yvette Carnell

If during the run-up to the 2008 election you’d told black voters that the election of the first black president would set the stage for a credit downgrade at one of America’s most elite historically black colleges, you would’ve been soundly mocked and briskly dismissed. Later, however, you would’ve been proven right, since Moody’s Investors Service downgraded Howard University’s credit rating on Tuesday, citing declining revenues at HBCUs and Congressional budget cuts.

Howard University’s credit rating was reduced from A3 to Baa1 after a review which began in July. According to Moody’s, fundraising is weak, resulting in an increased credit risk for the university.

Howard is a private university but relies on $250 million dollars from the government annually and will be impacted by budget cuts. Another reason for declining revenue at the school are new rules put in place by the Obama administration.

In July, BreakingBrown reported[2] that some historically black colleges were considering suing the Obama administration over new rules which were costing the schools millions in revenue:

When the Obama administration changed its financial aid policy and began checking the last five years of a parent’s credit history—which spans the deepest  recession in modern history—for defaults, instead of just the last 90 days, as was previously the policy, the rug was pulled out from under black schools. This policy change forced 28,000 HBCU students to drop out, and cost schools $150 million.

The New Republic also reported [3]on the importance of HBCUs and the crippling impact of the Obama administration’s new rules:

As a result, the number of PLUS loans granted was unexpectedly cut in half. Black schools’ advocates and students have been decrying the policy for almost two years, but the rising tension burst wide open last month when Howard University, the wealthiest HBCU with an endowment of around $460 million, announced it was in financial straits[4].

….

HBCUs constitute three percent of America’s colleges but produce 20 percent[5] of black graduates, 50 percent of black public school teachers and lawyers, 80 percent of black judges, and 90 percent of black BA’s in STEM fields.”

HBCU’s serve disproportionately poor students, but given the circumstances, one wonders how much longer they’ll be able to function in this way.

Disclaimer: Yvette Carnell is a graduate of Howard University.

Endnotes:
  1. [Image]: http://breakingbrown.com/wp-content/uploads/2013/09/howard-university-2.jpg
  2. reported: http://breakingbrown.com/2013/07/historically-black-colleges-planning-to-sue-obama-administration-over-student-loan-practices/
  3. reported : http://www.newrepublic.com/article/113761/black-colleges-need-obamas-help-and-may-sue-get-it#
  4. in financial straits: http://articles.washingtonpost.com/2013-06-14/local/39973825_1_howard-university-trustees-kerry-ann-hamilton
  5. 20 percent: http://www.mcclatchydc.com/2010/02/04/v-print/83732/obama-boosts-funds-for-historically.html

Source URL: http://breakingbrown.com/2013/09/howard-universitys-credit-rating-downgraded-due-to-declining-revenue/