It’s time for Historically Black Colleges and Universities (HBCUs) to get what they deserve.
After a 2016 Duke University research paper revealed that HBCUs pay more for loans than other colleges and universities, Congress has decided to revisit the issue at hand and it looks like the change that is needed could soon come.
“Specifically, in an analysis of almost 1,000 colleges, about 10% of which were HBCUs, issuance costs for HBCUs were about 20% more than non-HBCUs because it’s harder for those underwriters to find buyers,” said Professor Mayew in regards to those exact findings. “As an example, our estimates suggest that to issue a $30 million bond, it costs an HBCU about $290,000, versus about $242,000 for a non-HBCU. This $48,000 difference is a significant financial burden. And this effect is much stronger in states that are known to exhibit high racial animus. This is particularly problematic because those very states are where many of the HBCUs reside.”
The evidence of their research had Congress go back to the new legislation for HBCUs that they had begun drafting in 2016. Now, with support from Lobbyists and considering Biden’s announcement on relief for HBCU students, it’s imperative that the injustices these colleges face come to a halt.
However, Professor Mayew shares that the path to a solution isn’t quite that easy because technically what’s happening isn’t against the law.
“Finding a solution is difficult because no one’s breaking the law,” he continued. “To make this go away, you have to make the search costs go down. One way to do that is to make the state tax benefit transferable, so schools can better attract buyers from other states. This is what would occur if HBCU bonds were made triple-tax exempt.”
For more on the insights from the report and to follow this case, click here.