HISTORICALLY BLACK COLLEGE AND UNIVERSITY

CAPITAL FINANCING PROGRAM ACCOUNT

Department of Education

HISTORICALLY BLACK COLLEGE AND UNIVERSITY

CAPITAL FINANCING PROGRAM ACCOUNT

Fiscal Year 2016 Budget Request

CONTENTS

Page

Appropriations Language .................................................................................................. V-1

Analysis of Language Provisions and Changes................................................................. V-2

Amounts Available for Obligation ...................................................................................... V-3

Authorizing Legislation...................................................................................................... V-4

Appropriations History....................................................................................................... V-5

Activity:

Federal administration ............................................................................................... V-6 Appropriati ons Language
HISTORICALLY BLACK COLLEGE AND UNIVERSITY

CAPITAL FINANCING PROGRAM ACCOUNT

Appropriations Language

For the cost of guaranteed loans, $19,096,000, as authorized pursuant to part D of title III of 

the Higher Education Act of 1965 (“HEA”), which shall remain available through September 30, 

[2016] 2017:

1 Provided, That such costs, including the cost of modifying such loans, shall be as 

defined in section 502 of the Congressional Budget Act of 1974:2 Provided further, That these 

funds are available to subsidize total loan principal, any part of which is to be guaranteed, not to 

exceed $303,593,000:

3 Provided further, That these funds may be used to support loans to 

public and private historically Black colleges and universities without regard to the limitations 

within section 344(a) of the HEA.4

In addition, for administrative expenses to carry out the Historically Black College and 

University Capital Financing Program entered into pursuant to part D of title III of the HEA,

[334,000] $340,000.

5 (Department of Education Appropriations Act, 2015.)

NOTES

Each language provision that is followed by a footnote reference is explained in the Analysis of Language 

Provisions and Changes document which follows the appropriation language.

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HISTORICALLY BLACK COLLEGE AND UNIVERSITY

CAPITAL FINANCING PROGRAM ACCOUNT

Analysis of Language Provisions and Changes

Language Provision Explanation

1 For the cost of guaranteed loans, 

$19,096,000, as authorized pursuant to part 

D of title III of the Higher Education Act of 

1965 (``HEA''), which shall remain available 

through September 30 [2016] 2017:

In accordance with the Federal Credit 

Reform Act of 1990, the requested language 

appropriates $19.096 million in subsidy for 

new loans to be made under the HBCU 

Capital Financing program. This amount will 

be available for obligation for 2 fiscal years. 

No loans may be insured under the program 

that would require subsidy above this 

amount.

2Provided, That such costs, including the cost 

of modifying such loans, shall be as defined 

in section 502 of the Congressional Budget 

Act of 1974:

This requested language specifies that any

program costs or cost modifications shall 

comply with the definitions that are provided 

in Section 502 of the stated Act.

3Provided further, That these funds are 

available to subsidize total loan principal, any 

part of which is to be guaranteed, not to 

exceed $303,593,000:

The requested language limits the amount of 

bonds that may be insured under the HBCU 

Capital Financing program to $303.593 million 

in fiscal year 2015.

4Provided further, That these funds may be 

used to support loans to public and private 

historically Black colleges and universities 

without regard to the limitations within section 

344(a) of the HEA.

The requested language allows the program 

to make loans in fiscal year 2015 without 

regard to the language in HEA section 344(a) 

that sets limits on the amount of the 

program’s loan authority that can be devoted 

to private versus public HBCUs.

5 In addition, for administrative expenses to 

carry out the Historically Black College and 

University Capital Financing Program entered 

into pursuant to part D of title III of the HEA, 

[334,000] $340,000.

In accordance with the Federal Credit 

Reform Act of 1990, this language 

appropriates funds to administer new loans, 

service existing loan obligations, and provide 

technical assistance to prospective and 

existing program participants.

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CAPITAL FINANCING PROGRAM ACCOUNT

Amounts Available for Obligation

(dollars in thousands)

Appropriations and Adjustments 2014 2015 2016

Discretionary:

Appropriation ......................................................... $19,430 $19,430 $19,436

Mandatory:

Appropriation ......................................................... 35,754 18,240 0

Total, discretionary and mandatory

appropriation ............................................... 55,184 37,670 19,436

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HISTORICALLY BLACK COLLEGE AND UNIVERSITY

CAPITAL FINANCING PROGRAM ACCOUNT

Authorizing Legislation

(dollars in thousands)

Activity

2015

Authorized

2015

Estimate

2016

Authorized

2016

Request

Federal administration (Federal Credit Reform Act of 1990, 

section 505(e) and Title III, part D, HEA) Indefinite $334 Indefinite $340

New loan subsidy (Title III, part D, HEA and Federal Credit 

Reform Act of 1990, section 505(e)) Indefinite 19,096 Indefinite 19,096

Reestimate of existing loan subsidies (Federal Credit Reform 

Act of 1990, section 504 (f)) (Mandatory) Indefinite 18,240 Indefinite 0

Total definite authorization

Total discretionary appropriation 19,430 19,436

Total mandatory appropriation 18,240 0

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HISTORICALLY BLACK COLLEGE AND UNIVERSITY

CAPITAL FINANCING PROGRAM ACCOUNT

Appropriations History

(dollars in thousands)

Year

Budget 

Estimate 

to Congress

House 

Allowance Foot

-

note

Senate 

Allowance Footnote Appropriation

2007 $190 N/A1 N/A1 $209

Supplemental (PL 109-234) 0 0 0 304,560

2008 188 $188 $188 185

2009 10,354 10,3542 10,3542 10,354

2010 20,582 20,582 10,3543 20,582

2011 20,582 20,5824 20,5823 20,5415

2012 20,582 20,5416 20,5416 20,502

2013 20,502 19,4307 19,4307 19,430

2014 20,502 N/A8 20,4843 19,430

2015 19,430 N/A8 20,4449 19,430

2016 19,436

1 This account operated under a full-year continuing resolution (P.L. 110-5). House and Senate Allowance 

amounts are shown as N/A (Not Available) because neither body passed a separate appropriations bill. 2 The levels for the House and Senate allowances reflect action on the regular annual 2009 appropriations bill, 

which proceeded in the 110th Congress only through the House Subcommittee and the Senate Committee. 3 The levels for the Senate allowance reflect Committee action only. 4 The level for the House allowance reflects the House-passed full-year continuing resolution. 5 The level for appropriation reflects the Department of Defense and Full-Year Continuing Appropriations Act, 

2011 (P.L. 112-10). 6 The level for the House allowance reflects an introduced bill and the level for the Senate allowances reflects 

Senate Committee action only. 7 The level for the House and Senate allowances reflect action on the regular annual 2013 appropriations bill, 

which proceeded in the 112th Congress only through the House Subcommittee and the Senate Committee. 8 The House allowance is shown as N/A because there was no Subcommittee action. 9 The level for the Senate allowance reflects Senate Subcommittee action only.

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HISTORICALLY BLACK COLLEGE AND UNIVERSITY

CAPITAL FINANCING PROGRAM ACCOUNT

Federal administration

(Federal Credit Reform Act of 1990, section 505(e) and the Higher Education Act of 1965, title 

III, part D)

(dollars in thousands)

FY 2016 Authorization

Federal administration: Indefinite

New loan subsidy costs: Indefinite1

Budget Authority:

Authority 2015 2016 Change

Federal Administration $334 $340 +$6

New loan subsidy costs 19,096 19,096 0

Total 19,430 19,436 +6

Full-time equivalent employee 1 1 0

1 Although the amount authorized for subsidy costs of new loans is indefinite, section 344(a) of the HEA limits the 

aggregate principal amount of outstanding bonds insured, together with any accrued unpaid interest thereon, to 

$1,100,000,000, of which not more than $733,333,333 may be used for loans to eligible private HBCUs and not more 

than $366,666,667 may be used for loans to eligible public HBCUs. The 2015 appropriations bill included language 

removing this limitation. The 2016 request includes appropriations language to remove this limitation for new loans 

made in fiscal year 2016.

PROGRAM DESCRIPTION

Since fiscal year 1996, the Historically Black Colleges and Universities Capital Financing 

Program has provided Historically Black Colleges and Universities (HBCUs) with access to 

capital financing for the repair, renovation, and, in exceptional circumstances, construction or 

acquisition of educational facilities, instructional equipment, research instrumentation, and 

physical infrastructure.

HBCUs, which have played a prominent role in our Nation’s history, have significant needs for 

capital improvements. However, in most cases these institutions cannot access traditional 

funding sources at reasonable interest rates. The HBCU Capital Financing Program provides 

HBCUs with access to low-cost financing to fund infrastructure improvements. This program 

has made low interest loans available for capital improvements to some of the Nation’s most 

vulnerable institutions of higher education, which have allowed these institutions to make 

improvements to their capital stock, especially academic facilities and student living-quarters. 

Under this program, the Department is authorized to provide financial insurance to guarantee up 

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HISTORICALLY BLACK COLLEGE AND UNIVERSITY

CAPITAL FINANCING PROGRAM ACCOUNT

Federal Administration

to $1.1 billion in loans and interest to qualifying HBCUs—$733.3 million for private HBCUs and 

$366.7 million for public HBCUs.

In order to limit the Federal Government’s exposure to incurring losses due to defaults and 

delinquencies, 5 percent of all loans are deposited in a pooled escrow account from which loan 

payments can be made in the event of defaults or delinquencies.

The HBCU Capital Financing Advisory Board, appointed by the Secretary, advises the 

Secretary and the Designated Bonding Authority (DBA) as to the most effective and efficient 

means of implementing the program. The DBA, also selected by the Secretary, assists with the 

operation of the HBCU Capital Financing Program, which includes raising bond capital, making 

loans to eligible institutions, charging interest, and providing for a schedule of repayments. 

Direct loans are financed through the Federal Financing Bank and guaranteed loans are 

financed through the private market, with all loan payments fully insured by the Federal 

Government.

Federal Administration

Funds for this activity pay the Federal costs for administering the HBCU Capital Financing 

Program. The administrative costs for this program include the personnel compensation and 

benefits for 1 full-time equivalent (FTE) employee, overhead, and other administrative services. 

The FTE reported in this account reflects the Department's estimate of the staff time devoted to 

administering the program. This estimate does not include FTEs associated with the 

Department's centralized services, which are reflected in the Program Administration account in 

the Salaries and Expenses Overview. The major non-personnel costs include support for the 

HBCU Capital Financing Advisory Board and a contract with the DBA to provide technical 

assistance workshops.

Subsidy Costs

In the first 10 years that the HBCU Capital Financing Program operated, there were no 

delinquencies or defaults. The rigorous application and credit review process imposed by the 

Department and the DBA was credited with ensuring that institutions receiving loans under this

program had the ability to comply with the terms of their loans. However, in 2004, Barber Scotia 

College lost its accreditation with the Southern Association of Colleges and Schools. As a 

result, students enrolled at Barber Scotia College were no longer eligible for Federal student 

assistance. With approximately 90 percent of the College’s students receiving some form of 

government assistance, this rendered the College unable to service its debt under the program. 

Barber Scotia College has one $7.0 million loan under the program, of which $6.1 million is 

currently outstanding. In addition, there will be a total of $3.4 million in interest due over the 

remaining life of the loan. Since March 2005, Barber Scotia College’s principal and interest 

payments have been made from the pooled escrow account. The DBA, which holds the loans 

that are guaranteed through this program, initiated foreclosure actions against Barber Scotia 

College to recover funds owed.

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CAPITAL FINANCING PROGRAM ACCOUNT

Federal Administration

Following emergency supplemental appropriations1 in fiscal year 2007, the Department awarded 

approximately $400.0 million in loan guarantees to institutions affected by Hurricanes Katrina 

and Rita. These loans were exempt from the pooled escrow requirement and limited to a 

maximum interest rate of 1 percent, increasing Federal liability and interest subsidy cost.

1 The Emergency Supplemental Appropriations Act for Defense, the Global War on Terror, and Hurricane 

Recovery, 2006 Sec. 2601 waived HEA provisions 343(b)(2) and 343(b)(8) and required the Secretary to pay any 

interest in excess of 1 percent for loans to institutions affected by Hurricanes Katrina and Rita.

Funding levels for the past 5 fiscal years were:

(dollars in thousands)

2011.....................................................................................$20,541

2012.......................................................................................20,502

2013.......................................................................................19,430

2014.......................................................................................19,430

2015.......................................................................................19,430

FY 2016 BUDGET REQUEST

The Administration requests $19.43 million for the Historically Black College and University 

(HBCU) Capital Financing Program account for fiscal year 2016. The request includes 

$340,000 for administrative expenses and an additional $19.096 million for new loan subsidy 

costs. The Administration requests that loan subsidy be available through September 30, 2017.

The Department has found that a narrow, one-year window for obligation of annual funds 

constrains the planning process for new program loans, decreases the number of projects that 

can be considered for funding, and limits the Department’s ability to ensure loans are fairly 

allocated among as many eligible institutions as possible. By comparison, a two-year window 

for obligation can facilitate more deliberate planning and better promote the goals of the 

program’s statutory mandate.

The $340,000 in administrative expenses will be used to maintain technical assistance services. 

These services prepare eligible institutions to access capital markets by enhancing their fiscal 

stability. For presentation purposes, the full-time equivalent and administrative costs financed 

by this account are also included under the justification materials in the Salaries and Expenses 

Overview.

The Administration’s request includes $19.096 million for new loan subsidy costs and 

anticipates that the requested subsidy amount will be sufficient to guarantee $286 million in new

loans. Congress appropriated subsidy funds with two-year availability in fiscal years 2014 and 

2015. This allows the Department to support a maximum of $782 million in new loan volume in 

fiscal years 2015 and 2016 with $193 million of that authority in fiscal year 2015 carrying over 

from fiscal year 2014 subsidy.

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HISTORICALLY BLACK COLLEGE AND UNIVERSITY

CAPITAL FINANCING PROGRAM ACCOUNT

Federal Administration

Under this program, the Department is authorized to provide financial insurance to guarantee up 

to $1.1 billion in principal and interest to qualifying HBCUs—$733.3 million for private HBCUs 

and $366.7 million for public HBCUs. The Department has reached the statutory limit for private 

loans and expects to reach the statutory limit for public loans in 2015. Thus, the Administration

seeks appropriations language that would allow the Department to continue to make loans in 

fiscal year 2016 without regard to the language in HEA section 344(a) that sets limits on the 

amount of the program’s total loan authority and on the loan authority for public and private 

HBCUs.

PROGRAM OUTPUT MEASURES (dollars in thousands)

Measures 2014 2015 2016

Number of new loans

New loans to Private HBCUs 4 8 8

New loans to Public HBCUs 1 8 8

Total new loans 5 16 16

New loan volume

New loans to Private HBCUs $87,200 $151,500 $151,500

New loans to Public HBCUs 7,500 151,500 151,500

Total new loan volume 94,700 303,000 303,000

Total number of loans

Total loans to Private HBCUs 44 52 60

Total loans to Public HBCUs 10 18 26

Total number of l oans 54 70 86

Total loan awards

Total loans to Private HBCUs $1,272,885 $1,424,385 $1,575,885

Total loans to Public HBCUs 320,109 471,609 623,109

Total outstandi ng awards 1,592,994 1,895,994 2,198,994

Total outstanding loan awards:

Total loans to Private HBCUs $1,028,947 $1,145,585 $1,265,137

Total loans to Public HBCUs 227,655 372,061 516,397

Total outstandi ng awards 1,256,602 1,517,646 1,781,534

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HISTORICALLY BLACK COLLEGE AND UNIVERSITY

CAPITAL FINANCING PROGRAM ACCOUNT

Federal Administration

PROGRAM PERFORMANCE INFORMATION

Performance Measures

This section presents selected program performance information, including, for example, GPRA 

goals, objectives, measures, performance targets and data, and an assessment of the progress 

made toward achieving program results. Achievement of program results is based on the 

cumulative effect of the resources provided in previous years and those requested in fiscal year 

2016 and future years, as well as the resources and efforts invested by those served by this 

program.

Goal: To improve loan recipients’ overall financial stability and enhance their ability to 

attract, retain and educate students.

Objective: Total revenues and investment return will increase for loan recipients.

Measure: The percentage of borrowers who increase revenues and investment return 

annually.

Year Target Actual

2010 70% 71%

2011 70 21

2012 70 55

2013 70

2014 70

2015 70

Additional information: This performance measure is the percentage of HBCUs that 

experienced an increase in revenue over the prior year. This measure is one gauge of 

improved institutional financial stability and capability to fulfill their educational mission. Loans 

that fund capital and infrastructure improvements are key assets for providing quality 

postsecondary education. Some HBCUs have significant cash flow problems, which capital 

improvements from this program are expected to help ameliorate. Revenue is a strong indicator 

of an institution’s success at maintaining or increasing enrollment, expanding fundraising 

activities, and, ultimately, the institution’s financial stability. The ability to maintain or increase 

revenue suggests that an institution will be able to service its debts and maintain its operations. 

This measure helps to assess the financial solvency of borrowers, which is a gauge of default 

potential. This measure is calculated as the number of HBCUs in the program that have 

experienced an increase in revenue over the prior fiscal year, divided by the total number of 

HBCUs in the program, and multiplied by 100. The data source for total revenues is the 

National Center for Educational Statistics' Integrated Postsecondary Education Data System. 

Data for 2013 was not available in time for this publication.

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HISTORICALLY BLACK COLLEGE AND UNIVERSITY

CAPITAL FINANCING PROGRAM ACCOUNT

Federal Administration

Objective: Improve the delinquency rate of loan recipients.

Measure: The delinquency rate of loan recipients.

Year Target Actual

2011 14% 37%

2012 14 19

2013 14 36

2014 14

2015 14

2016 14

Additional information: The delinquency rate—the percentage of loan payments received 

between 11-59 days after the due date—indicates the financial stability of borrowers. The ability 

to make timely payments reduces the likelihood of default. It also indicates successful 

monitoring, technical assistance, and enforcement by the Department and the Designated 

Bonding Authority (DBA) in administering the program. The actual percentage represents those 

institutions delinquent in the fourth quarter of the fiscal year indicated.

Goal: To improve the capacity of program borrowers to improve student success and 

provide high-quality educational opportunities for their students.

Objective: Maintain or increase the persistence rate of first-year students at borrower 

institutions.

Measure: The percentage of first-time, full-time, degree-seeking, undergraduate students who 

were in their first year of postsecondary enrollment in the previous year and are enrolled in the 

current year at the same loan recipient institution.

Year Target Actual

2011 66% 61%

2012 67 61

2013 68 61

2014 69

2015 70

2016 71

Additional information: New and improved physical facilities can help an institution of higher 

education increase student persistence. Many of the loans have provided support for student 

housing and many of the borrowers have explicitly cited the lack of adequate student housing 

and facilities as a reason for high attrition rates on their campuses in their loan applications. 

This measure relies on data taken from the Integrated Postsecondary Education Data System

maintained by the National Center for Education Statistics. Data for 2014 was not available in 

time for this publication.

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HISTORICALLY BLACK COLLEGE AND UNIVERSITY

CAPITAL FINANCING PROGRAM ACCOUNT

Federal Administration

Other Performance Information

In 2006, the U.S. Government Accountability Office (GAO) conducted an examination of the 

HBCU Capital Financing Program. The objectives of the study were to review: (1) HBCU 

capital project needs and program utilization; (2) program advantages compared to other 

sources of funds and schools’ views of loan terms; (3) the Department’s program management;

and (4) new loan provisions enacted in June 2006 to assist in hurricane recovery efforts. GAO 

noted that the HBCU Capital Financing Program provides HBCUs with access to low-cost 

capital financing not available elsewhere. The report also noted that the Department had taken 

steps to improve the program that included increasing flexibility by providing schools with both 

fixed and variable interest rate options, allowing for larger loans, affording schools with more 

opportunities to negotiate loan terms, and increasing marketing efforts for the program. The 

report also made several recommendations for improving program management.

The Department has fully addressed each of GAO’s recommendations with the exception of the 

recommendation to allow borrowers to make semiannual rather than monthly payments, which 

the Department believes would increase the likelihood of delinquency and default. GAO’s 

recommendations are presented below, followed by a description of the Department’s actions to 

address them.

• The Department should regularly convene and consult with the HBCU Capital Financing 

Program’s Advisory Board. Additionally, the Department and the Advisory Board should 

consider the feasibility of alternatives to the escrow arrangement. If the Department 

determines that statutory changes are needed to implement more effective alternatives, it 

should seek such changes from Congress. The HBCU Capital Financing Program’s 

Advisory Board now meets twice each year. In addition, following consideration of several 

alternatives to the current escrow arrangement, the Department will propose changes to the 

program statute to allow the escrow requirement to be waived for new loans in favor of a 

non-refundable fee to be paid in the form of a fixed percentage add-on to the interest rate.

• The Department should enhance communication with HBCU Capital Financing Program 

participants by: (1) developing guidance for HBCUs, based on other schools’ experiences 

with the program, on steps that applicants can take to expedite loan processing and receipt 

of loan proceeds; and (2) regularly informing program applicants of the status of their loan 

applications and Department decisions. The Department has taken a number of steps to 

improve communication with HBCU program participants and address this GAO 

recommendation. The Department studied the experiences of past borrowers and used the 

findings to develop guidance that will allow applicants to expedite loan processing. Further, 

the Department developed a customer satisfaction survey that is sent to borrowers after 

they have closed on a loan. This survey asks borrowers to rate the level of service at every 

stage of the process and asks borrowers to recommend improvements to the loan process. 

Using the results of this study and borrower feedback, the Department has developed a

Q&A section on its website (http://www2.ed.gov/programs/hbcucapfinance/faq.html) that 

includes an overview of the loan progress, a list of the information commonly needed to 

process a loan, and information about what a school can do to expedite the loan application 

and closing processes.

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HISTORICALLY BLACK COLLEGE AND UNIVERSITY

CAPITAL FINANCING PROGRAM ACCOUNT

Federal Administration

• The Department should change its requirement that borrowers make monthly payments to a 

semiannual payment requirement. While the Department understands institutions’ 

preference for semi-annual rather than monthly payments, the potential for default, as well 

as each institution’s potential exposure from the default of another program participant, 

leads the Department to believe that it would be imprudent to implement a less frequent 

payment schedule.

• The Department should ensure that the program subsidy cost estimation process includes 

as a cash flow to the government the surcharge assessed by the Federal Financing Bank 

(FFB) and paid by HBCU borrowers and pay such amount to the program’s financing 

account. Additionally, the Department should audit the surcharge funds held by the DBA. In 

response to this recommendation, the Department audited the funds held by the trustee on 

behalf of the program generated by this FFB surcharge and developed a protocol for 

quarterly transfers of these fees into the program’s financing account. In addition, the 

Department worked with OMB to make several improvements to the cash flow model used 

for subsidy cost estimation, including incorporating the FFB fee in the program’s cash flows. 

Beginning with the fiscal year 2010 budget request, cost estimates include the FFB fee as a 

cash flow to the Government.

• The Department should increase monitoring of the DBA to ensure compliance with 

contractual requirements and ensure properly marketing the program. In response to this 

recommendation, the Department retained an independent firm to audit the DBA during 

fiscal year 2007 to assess the handling of loan funds and associated fees. This audit 

assessed the DBA’s record-keeping function and determined what documents the DBA 

needs to obtain to complete its files. To assist the DBA, the Department developed a 

checklist indicating required and optional documents to include in a complete file. The 

Department uses this list to monitor record-keeping. After each closing, the Department 

ensures that the borrower’s loan transcript file is complete by cross-checking the pre-closing 

document list with the actual closing document list and actual documents presented at 

closing. This process has been carried over to the new DBA, which began operating in 

fiscal year 2009.

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