Default Rates at HBCUs

Pursuant to a congressional request, GAO provided information on federally guaranteed student loan default rates at historically black colleges and universities (HBCU), focusing on: (1) how current HBCU cohort default rates compare with prior year default rates; (2) the number of HBCU that could lose their Federal Family Education Loan (FFEL) eligibility or be subject to a state review; and (3) the number of HBCU with cohort default rates above Department of Education thresholds. GAO noted that: (1) 33 of the 104 HBCU may lose their FFEL eligibility in fiscal year (FY) 1994 and 41 HBCU could be subject to state review if high cohort default rates persist; (2) the number of HBCU that would become ineligible for FFEL would decrease if Education raised its cohort default threshold rate from 25 to 40 percent; (3) 26 additional HBCU could be subject to state review if they continue to rely on federal financial aid; (4) about two-thirds of the 104 HBCU could be subject to administrative default threshold sanctions because they have FY 1994 cohort default rates above Education's 20-percent threshold rate; (5) Education could limit, suspend, or terminate up to 14 HBCU student aid programs if they do not reduce their default rates to conform with Education thresholds; and (6) although Education has not initiated action against any institution because of its high default rate, it settled actions against 4 HBCU by the end of 1993.