Some historically black colleges and universities (HBCUs) are struggling to keep their doors open — and their origin story has a direct correlation to their current difficulties, said Harry L. Williams, president of the Thurgood Marshall College Fund.

Cheyney University, the first HBCU, was founded in 1837, and there are 100 currently operational. HBCUs were created to provide black students access to higher education, as they largely did not have access to other schools, a phenomenon that has evolved as society has become more integrated following the civil rights movement, Williams said. Now black students can go to any university in the country, which dilutes the overall applicant pool for HBCUs, he said.

That dynamic has been present for decades, and the current difficulties experienced at some HBCUs are a direct result, Williams said.

Through 1980, enrollment grew at HBCUs, but that has changed as more black students look to “traditional or mainstream” universities, said Richard Vedder, professor emeritus at Ohio University. The false perception is that the mainstream schools provide better programs or more opportunities upon graduation, which implies HBCUs are medium-to-low quality institutions, he said.

“HBCUs as a group are in trouble, no doubt about it,” Vedder said. “Enrollments have fallen substantially and endowments are very low at most of these schools, and therefore have little cushion, though that’s offset by federal support to HBCUs, which have kept them alive.”

Some are much better positioned than others, and will certainly survive, such as Spellman College in Atlanta or Howard University in Washington, D.C., but there are others “in deep trouble,” Vedder said.

The storm has been brewing for decades, but the potential weaknesses have been left unaddressed, Williams said.

“Without a sense of urgency, there’s a sense of complacency,” Williams said. “Some of these things have crept up on our schools, but there’s nothing new as far as sounding the alarm.”

A factor impacting higher education across the board is that the number of high school age students has dropped and will continue to fall in coming years, leading to fewer potential students overall, Williams said.

Although many HBCUs are “very stressed,” many of their problems are shared broadly. All schools, not just HBCUs, are experiencing funding issues with a diminished applicant pool and as federal and state funding shrinks, said Bill Bonawitz, director of municipal research at PNC Capital Markets.

As the number of high school aged students decline, many schools, HBCUs and otherwise, serve a regional population, which further exacerbates the struggle, but that issue is less pronounced in the west and southeast, which are experiencing population increases, Bonawitz said. In addition, HBCUs are self-selecting, targeting a specific segment of the population, which further reduces the applicant pool, he said.

“When the whole pool is shrinking and you’re limited to a subset of a subset, it causes even more stress for those entities,” Bonawitz said. “They’re (deteriorating) to varying degrees, but the bigger trend may be the limited basis of potential matriculants.”

All of the factors make higher education a tough sector, and many on the buyside are underweight in the sector, especially when it comes to self-selecting schools, Bonawitz said.

“And I get where they’re coming from — one of the pockets of weakness are the self-selecting schools,” Bonawitz said. “But the flipside, if you’re a specialization school in the west or southeast, design, science, art, or engineering, that’s part of the bigger picture with the whole thing and HBCUs fit into that.”

Small, private liberal arts schools share some of the same struggles, but the challenges facing HBCUs are distinct as their reputations decline and they lose market share, Vedder said.

“HBCUs are particularly difficult because middle class blacks who would have considered HBCUs no longer think they’re good enough, and they’re getting wooed by more wealthy, mainline and traditional schools, and in some cases, elite schools,” Vedder said. “I don’t see any easy way out, they’re obviously going to survive, and will have to consider changing their model.”

Financial problems lead to accreditation risk

“The challenge has been some accreditation issues, as it relates to finances, because a lot of them are dependent on tuition to stay in business and if you don’t have enrollment numbers, it can put stress on the system,” Williams said.

Several schools are experiencing challenges or facing closures. Bennett College is at risk of closure after its accreditor, the Southern Association of Colleges and Schools Commission on Colleges (SASC), voted last month to end Bennett’s accreditation, citing major budget deficits after two years of probationary accreditation. To avoid closure, it must come up with USD 5m by 1 February.

Alabama State University has a non-investment grade Ba2/negative rating from Moody’s Investors Service as a result of its declining enrollment, and consequent financial weaknesses. High levels of turnover have also contributed to its instability, worsened by a state investigation surrounding “suspicious” contracts awarded by the university’s board of trustees. In 2014, that, and financial instability, led to a warning from SASC, the university’s accreditor, though the warning was lifted in 2016.

HBCUs also experience challenges due to a lack of stability in leadership roles, Williams said. At HBCUs, presidents stay for three years on average, and at predominantly white schools, the average overall tenure is between seven and eight years, he said.

“When you don’t have stability, that creates challenges for schools in terms of confidence in leadership and stability, in terms of potential funders wanting to support the school,” Williams said.

Between 2010 and 2016, Elizabeth City State University, an HBCU in North Carolina, lost more than half of its students, which led the state to spring into action by offering reduced tuition across the board for all students.

Cheyney University, in southeastern Pennsylvania, is another at-risk school, although it received a second one-year extension to its probationary accreditation status by the Middle States Commission on Higher Education to resolve financial and other issues. The state system has provided and forgiven more than USD 30m in loans to the school, which was first placed on probation in 2015. Thus far, the powers that be have been resistant to merging the campus with one of the stronger, sister schools within the system.

Potential solutions

Schools need to begin looking at alternative options for viability, including consolidation and mergers, Williams said.

“Schools want to maintain their independence and status as an HBCU, and are emotionally involved — but if you’re at risk of losing the whole university, what alternatives do you have?” Williams said.

For example, part of the problem at Cheyney is partially sentimental — it’s the first HBCU nationwide, and given that historical status, there is resistance to any consolidation or merger, Williams said.

Two Georgia schools that recently merged, Albany State and Dalton State, have seen some challenges but they’ve made progress and are on the path toward stability, Williams said.

Recruiting and enrolling students of other demographics is an increasing trend, Williams said. This is especially true with International students, for two reasons. More and more students are coming to the United States from other countries to study, and international students pay more than domestic students, as they are less reliant on institutional aid, he said.

But as HBCUs diversify, the challenge is overcoming the fear of a cultural shift on campus, or concerns from non-black students about not fitting in on campus, Williams said.

Recruiting other minorities is a necessary strategy for all schools, especially as the country becomes more Asian and Hispanic, but it’s not a cure-all, said Marybeth Gasman, director of the Penn Center for Minority Serving Institutions.

“There are very few HBCUs that have actively been embracing enrollment diversification,” Gasman said.

Positive indicators

Nearly 40% of HBCUs are experiencing increases in freshman enrollment, and others, aside from a few smaller ones, are holding steady, Gasman said.

“I always think (risk of closures or consolidations) is hyperbole,” Gasman said. “Bennett is a difficult situation in terms of accreditation right now, but people are rallying around it. Morris Brown has been hanging on by a string for 17 years, but it’s not the norm.”

Morris Brown College in Atlanta filed for Chapter 11 bankruptcy protection in 2012 to prevent foreclosure and sale of the school at auction. The institution is still open, though it is no longer accredited and serves only 55 students, compared to 2,700 at its peak in 2007.

And some schools, like North Carolina A&T University (NCAT), are thriving. Among HBCUs, NCAT is one of the jewels, the largest school and growing, with enrollment totaling approximately 12,000 this year, and in the next four years, that is expected to grow by 17% to 14,000.

“Our story is very different than many others, we’ve seen significant enrollment expansion and we’re the nation’s largest HBCU for the fifth consecutive year,” said Todd Simmons, NCAT associate vice chancellor for university relations. “Our narrative is counter to our peers in that respect, and with our general overall financial picture. We went through an academic reorganization a few years ago to be more responsive to the marketplace in terms of opportunities.”

That included stepping up science, technology, engineering and mathematics programs, or STEM offerings, Simmons said.

“We’re a national leader among HBCUs in STEM education. We produce more African American engineers than any university in America,” Simmons said.

Leadership has also been stable at NCAT, another distinction from other HBCUs, with the same chancellor serving for 10 years, Simmons said.

There are success stories, including NCAT. Spelman College, a women’s college in Atlanta, recently received USD 30m, the largest-ever gift to an HBCU, but the Bennetts and the Cheyneys of the world get the attention, Williams said.

“I would hate to see Bennett close, it’s a very strong institution in this country for African American women, and to see them in the position they’re in right now is very sad, and I hope they’ll turn around,” Williams said.

By Maria Amante of Debtwire