UNCF Opposes “The FRESH START Through Bankruptcy Act of 2021”

Calls for institutional risk sharing proposal to be dismissed from current legislation

UNCF opposes “The FRESH START Through Bankruptcy Act of 2021” in its current form because the version for the 117^th Congress includes institutional risk-sharing provisions. UNCF would support the baseline bill without these provisions.

“I have spoken to Capitol Hill policy and decision makers on both sides of the aisle for years, and I have never been clearer about any issue,” said Dr. Michael L. Lomax, president and CEO, UNCF. “Institutional risk-sharing has a possibility of bankrupting historically Black colleges and universities (HBCUs) and keeping low-income students of color from attending college. Any proposal that does not take into account that higher education costs are rising each year, plus the fact that Black student borrowers are uniquely disadvantaged because of the lower amount of household wealth in Black families versus our majority counterparts, is just a non-starter for UNCF and HBCUs. If this bill was proposed as it was in other years without this provision, it would once again enjoy our strongest endorsement.”

“Institutional risk-sharing would have a disproportionately negative impact on HBCUs because they force colleges and universities to make financial payments to the United States Department of Education when their students default on their student loan without consideration for the background of the students,” said Lodriguez Murray, senior vice president for public policy and government affairs at UNCF. “Institutional risk-sharing is the opposite of comparing apples with apples. It is a proposal without nuance.  While the base bill would help discharge debt, and that is needed; the institutional risk-sharing proposal would hurt HBCUs because they primarily serve low-income, first-generation and minority students who face challenges to college entry and completion.”

HBCUs are more likely to face risk-sharing penalties simply because they serve a high proportion (80%) of students who must borrow to attend college and have much greater student borrowing rate than the average (59%) borrowing rate at all public and private not-for-profit colleges and universities. Risk-sharing in effect penalizes HBCUs for ensuring the hardest-to-serve students have access to postsecondary education, while largely protecting the elite institutions that could most afford to send their students to college for free.

UNCF supports efforts to hold non-profit and for-profit colleges accountable, but there are better ways to achieve this goal. Institutional risk-sharing should be replaced with incentives that reward universities that serve at-risk students. For example, federal funding could be provided to institutions based on the number or percentage of Pell students they actually graduate. Policymakers should also double the Pell grant amount, helping to reduce the amount of student loans needed to complete college and going a long way towards leveling the playing field in higher education. Finally, interest rates should be lowered, and origination fees should be eliminated for federal student loans to reduce the cost of borrowing.

To learn more about UNCF’s positions on this or other similar issues, please contact UNCF’s Government Affairs team at UNCF.org/ContactUs.

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About UNCF
UNCF (United Negro College Fund) is the nation’s largest and most effective minority education organization. To serve youth, the community and the nation, UNCF supports students’ education and development through scholarships and other programs, supports and strengthens its 37 member colleges and universities, and advocates for the importance of minority education and college readiness. UNCF institutions and other historically Black colleges and universities are highly effective, awarding nearly 20% of African American baccalaureate degrees. UNCF administers more than 400 programs, including scholarship, internship and fellowship, mentoring, summer enrichment, and curriculum and faculty development programs. Today, UNCF supports more than 60,000 students at over 1,100 colleges and universities across the country. Its logo features the UNCF torch of leadership in education and its widely recognized trademark, ‟A mind is a terrible thing to waste.”^® For continuous updates and news, follow UNCF on Twitter at @UNCF.