It’s expensive to be poor. And few places in higher education feel that more acutely than historically black colleges and universities (HBCUs), where endowments are typically smaller and enrollments have fluctuated wildly over the past decade.
Now, to be clear, the financial misfortune of black colleges does not rest squarely on their shoulders. Born out of necessity primarily after the Civil War to educate black people who were shut out of most other colleges, the institutions have been plagued by unequal and inadequate funding ever since. HBCUs, half of which are public, draw a lion’s share of their revenue from state and federal funding. And as states tighten their belts on higher-education spending, these institutions are struggling to come up with the funds to improve their campuses by constructing new buildings or renovating ones that have started to wear down.
But there’s a way for colleges to circumvent their funding woes to pay for campus improvements: taking on debt. But even then, the legacy of racism in the treatment of black colleges is apparent.
There are a couple of steps colleges have to go through to issue bond debt. First, they have to find a bank to buy the debt. The bank will then sell the debt to public investors. The banks are the gatekeepers, and they’re essentially signing off on the fact that the loan isn’t a scam. But the banks don’t do this for free. They typically sell the debt at a slight markup as compensation for expenses and management fees—and that ultimately falls back on the college to pay off.