Racism Continues to Hurt Historically Black Colleges

Megan McArdle is a Bloomberg View columnist. She wrote for the Daily Beast, Newsweek, the Atlantic and the Economist and founded the blog Asymmetrical Information. She is the author of "“The Up Side of Down: Why Failing Well Is the Key to Success.”
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I live pretty close to Howard University (close enough that, before we moved in, the tenants of the house I now own were freshly minted grads). So I take an interest in its affairs. After all, it owns enough land in nearby neighborhoods that its decisions have an impact on my life. Plus ... well, it's hard to read the story of Howard without tearing up a little bit.

Recently, the university has been having trouble -- enrollments are down, and its finances seem shaky. One of the board members sent around an open letter declaring that unless something was done, the university wouldn't be here in a few years. Others said she was overreacting. This week, however, Howard's president abruptlystepped down, setting off a new round of speculation that things were very bad indeed.

Howard University is, in some sense, still struggling with the legacy of slavery and racism. Until the 1960s or 1970s, blacks weren't even nominally eligible for most of the best paid jobs in society; many of them were confined to the worst-paid work. That made it hard to save enough for a down payment on a house, one of the major vehicles by which Americans accumulated wealth from 1950 to 2008. Shakier employment prospects made it hard to keep making payments on that house. And because homes in black neighborhoods were seen as less desirable, they didn't appreciate as much as homes in white neighborhoods.

The sorts of intergenerational wealth transfer that many white middle-class people benefit from -- like help with a down payment or college tuition, perhaps financed by dipping into mom and dad's equity -- were much harder for young black families to get. The crash in 2008 only made things worse; the meager wealth that minority households had accumulated was reduced by more than half from 2005 to 2009, compared with about 16 percent for white households.

As I've pointed out in the past, you don't even have to think that racism is still a problem for this to be true; even after racism fades, its effects will linger in the wealth and opportunity of successive generations.

What this means for historically black colleges is smaller endowments than non-black institutions with comparably long legacies -- fewer rich alums, fewer bequests. It also meant that fewer of their students came from families who have chunks of cash that they can free up, either out of disposable income or assets like savings or home equity. So while they depend more on tuition, their student bodies had fewer resources to pay it.

The gap has been closed with loans. When the Department of Education tightened eligibility for PLUS loans (which are given to parents and grad students) last year, a lot of students seem to have found themselves priced out of historically black colleges and universities.

On the one hand, I'm actually glad they tightened these requirements; parents should not be taking out loans they'll have difficulty repaying in order to send their kids to a pricey private school. And in the long run, this may actually be good for black wealth; it's easier to save when you aren't burdened with years of debt payments. On the other hand, this has been a huge blow to colleges with a very proud tradition of fighting racism through education, along with all the regular proud traditions of college drinking and obstreperous fight songs. Howard makes the news, but it's probably relatively healthy, because it's one of the best-ranked historically black colleges. Lower-ranked schools, serving a less affluent student body, will suffer even more.

Howard is doing what it can to right the ship. Enrollment has rebounded slightly this year, and Howard seems to be trying to make cuts to bring costs in line with the tuition it can collect. But institutions like this really are like ships -- big ones that are hard to turn. The resignation of its president does not bode well for its chances of avoiding the shoals that lie ahead.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Megan McArdle at mmcardle3@bloomberg.net