The movement to grant refunds for room and boarding costs to college students displaced from campuses because of the coronavirus pandemic has recently gained steam as instruction and learning alike have begun to take place remotely. With institutions relying on such fees to support general operational expenses, historically Black colleges and universities (HBCUs) — which collectively have significantly lower endowments than predominately white schools (PWIs) — could be hit extra hard by refunding those costs to their students.
Florida A&M University (FAMU), for instance, could soon approve using more than $4 million in funding from its reserve accounts to recompensate their students’ prorated room and boarding costs. However, the actual amount of money that would be refunded is probably much smaller than the $4.3 million allotted for refunds for housing and meals plans at FAMU, according to the Tallahassee Democrat.
Chances are that these refunds are not protected under any insurance policies, either, meaning that the schools paying them out will most likely not be partially let alone fully recompensated. And while FAMU has a reported endowment of more than $100 million, parting ways with millions of dollars no matter what the amount can be devastating for any organization, especially a university.
Inside Higher Ed reported that universities should brace for the “revenue hits” that could also affect their credit ratings and “make it more difficult for colleges to borrow money in the future.” That aspect should be of particular concern for HBCUs, which Delece Smith-Barrow wrote last year in the New York Times were “on the brink of financial ruin.” Yes, the Senate did pass an amendment last year granting $255 million in funding to HBCUs; and yes, HBCUs were partially addressed in the $2 trillion stimulus package approved last week. But with a looming recession, rising college costs and declining enrollment, cutting checks that total seven figures for any unexpected payments could be the tipping point for some HBCUs.
“Because colleges are sending students home as a preventative measure, not because of an event that triggers coverage under their property or business interruption policy, these refund claims will likely not be covered,” Bret Murray, who leads higher education strategy at Risk Strategies Company, a national insurance brokerage and risk management firm, told Inside Higher Ed last month. “With that said, colleges should still put carriers on notice and keep track of all financial impacts related to COVID-19.”
The coronavirus came along and disrupted campus life at a time when historically Black colleges were already dealing with separate setbacks over student housing, according to Gregory Price, a professor of economics at the University of New Orleans.
“To the extent that HBCUs, relative to other schools, owe more debt tied to their dorms, the absence of students in residential on-campus housing could constitute a severe revenue shock,” Price wrote recently for the Conversation, an online opinion outlet for academics. “Perhaps an extreme example of this is the case of Bethune Cookman. The private historically black university in Daytona Beach, Florida is obligated to spend about US$306 million to pay off debt it took on to build a new dorm. If the outbreak continues, many of Bethune Cookman’s dorm rooms could wind up empty, as enrollment was already declining before this pandemic began. If that happens, it would reduce revenues to pay off the debt on the housing.”
HBCUs also don’t have the same kind of so-called “rainy day funds” that PWIs typically have ready access to, according to Marybeth Gasman, a professor of education at Rutgers University.
“Because HBCUs have small or relatively small endowments and because they educate some of the most socioeconomically vulnerable students, they face a disproportionately high level of risk right now,” he said. “HBCUs are similar to families without substantial savings. HBCUs are funded heavily by tuition. Any drop in enrollment, which could happen by way of students not returning next year or not enrolling next year, will be devastating.”
The good news is that Gasman doesn’t think the coronavirus crisis will result in any HBCUs closing immediately. However, she cautioned that doesn’t mean they’re not still in danger of closing.
“I have listened to people say over and over that HBCUs are going to close. Someone will predict the imminent closure of 30-40 about every five years. They are always wrong,” she said. “A few have closed but not many. Many colleges are closing and so yes, some HBCUs are in danger, but most HBCUs are incredibly resilient.”