Historically Black Colleges are critical for equality and need more funding

Published on23 JUN 2023
Making Progress Towards Racial Equity

Historically Black Colleges and Universities (HBCUs) have played an important role in the education and equality of Black Americans for more than 185 years. But even as racial disparities in American education persist, HBCUs are systemically underfunded, receive fewer private donations, and have smaller endowments. For these institutions to thrive, they need broad, intentional, and sustainable financial commitments, according to Goldman Sachs Research.

College education for Black Americans was rare prior to the Civil War and illegal in many Southern states. Many HBCUs were established in the Reconstruction Era, when education was seen as a pathway to political and social equality for Black Americans freed from slavery. These institutions are still a pathway to equality for their students, Goldman Sachs Research Chief Operating Officer Gizelle George-Joseph and Goldman Sachs economist Devesh Kodnani write.

“The case for investing in HBCUs centers on their unique position to help reduce racial, education, and economic inequities experienced by Black Americans which will improve Black communities and by extension, the broader country,” they write. “One of the key tenets of our inclusive growth research is that equity makes for not only a fairer, but also a richer society.”

While there have been significant gains for Black Americans in higher education, Black students’ graduation rates remain lower than the national average. HBCUs offer affordable education for low-income Americans — students at these schools often come from less advantaged backgrounds, live in poorer neighborhoods, and do not graduate from high schools that offer the necessary college preparation.

HBCUs are often near communities with a high proportion of low-income Black families and are important to the economic well-being of these communities. The authors note that the share of Black Americans with college degrees increases with proximity to Black Colleges and Universities.

And while academic research finds that college enrollment of low-income students has increased significantly over the last 20 years, access to colleges that offer the highest mobility success has largely stalled for low-income students. HBCUs advance students from lower-income families to higher incomes at roughly twice the rate of non-minority serving institutions.

That can be critically important — schools that bring in high numbers of low-income students provide a scalable model for advancing upward mobility for a greater number of students, according to a groundbreaking study by Raj Chetty and co-authors. They find that the earnings distribution tremendously impacts access to college.

For example, less than 4% of students at “Ivy Plus” colleges (the eight Ivy League colleges plus the University of Chicago, Stanford, MIT, and Duke) come from the bottom quintile of the income distribution. Low-income students, meanwhile, appear to have similar economic outcomes as high-income peers at selective colleges. This suggests that colleges are able to “level the playing field” for students from low-income families.

Building on the detailed data from this study, a publication from the American Council of Education (ACE) Center for Policy Research and Strategy suggests that HBCUs advance students from lower-income families to higher incomes at a significantly higher rate than non-minority serving institutions.

For generations, HBCU students have gone on to become leaders in American society, George-Joseph and Kodnani write. The list includes the likes of Thurgood Marshall (Lincoln University and Howard University), Katherine Johnson (West Virginia State University), Dr. Martin Luther King Jr. (Morehouse College), Dr. Ruth Simmons (Dillard University), Rosalind Brewer (Spelman College), and Kamala Harris (Howard University). Today, HBCUs make up less than 3% of colleges in the U.S. but are responsible for 13% of Black American bachelor’s degrees, more than 20% of Black STEM graduates and, importantly, make an outsized contribution in preparing Black students for medical school.

HBCUs are a key pathway for social and economic mobility, and they provide a safe place for it, George-Joseph and Kodnani write. Campuses with greater representation of students of color have fewer reports of race-based crimes. Faculty, staff, and administrators at HBCUs view student engagement as critical to their work and create a safe space for Black students who are often victims of stereotypes that influence professors’ assumptions about their potential, intellect, and ability to succeed. Black HBCU graduates are almost twice as likely as Black non-HBCU graduates to strongly agree that their universities adequately prepared them for life beyond college.

“Put simply, Black students can be influenced by the expectations or perceptions of negative stereotypes,” George-Joseph and Kodnani write. “Multiple studies document that HBCUs serve as safe learning environments for students of color.”

For all the value that HBCUs offer Black Americans and U.S. society, these institutions are systemically underfunded, George-Joseph and Kodnani write. In 1986, Congress amended the Higher Education Act of 1965 to increase funding for HBCUs in response to their finding that state and federal institutions had engaged in discriminatory practices that had financially disadvantaged HBCUs. While several steps have been taken to redress past discriminatory practices, funding disparities on a state and federal level still exist.

And although many HBCUs have seen an increase in private donations since the first quarter of 2020 — partially driven by greater financial need during the pandemic and the growing prominence of the Black Lives Matter movement — endowments have traditionally been much smaller at these institutions versus their predominantly white peers, and large gaps continue to exist today. Public HBCUs have 54% less in assets per student than public non-HBCUs, while private HBCUs have 79% less than private non-HBCUs, George-Joseph and Kodnani write. Academic research finds that while HBCUs are on average efficient organizations, they are under-funded and under-resourced.

Other gaps in funding also remain. From 2003 to 2015, private HBCUs experienced a 43% decline in federal funding per full-time student. Strikingly, the disparities in federal funding between private HBCUs and private non-HBCUs had narrowed in the early 2000s, but progress has since stalled.

George-Joseph and Kodnani offer first steps the public and private sector can take to help HBCUs flourish. In the public sector, these include upholding laws that mandate HBCU support and create access to federal resources, ongoing financial assistance for lower-income families, increasing Pell Grant recipients and dollar amounts, and equitably allocating federal and state funding.

The private sector can continue to play an active and powerful role in driving progress toward equality for Black communities by creating pathways for students at HBCUs to support college attendance and graduation, making donations without restrictions so HBCUs can direct funding to the initiatives and programs where it’s most needed, and setting aspirational goals for hiring HBCU interns and graduates.

“Reducing the racial college educational achievement gap requires sustainable investment in HBCUs and significant commitments across the public and private sectors,” George-Joseph and Kodnani write. “The case for investing in HBCUs centers on their unique position to help reduce racial, economic, and social inequities experienced by Black Americans and consequently improve Black communities and, by extension, the country.”

Goldman Sachs Research

The Case for Investing in HBCUs

Read The Report

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