Transcript

Charles Gerena: I'm Charles Gerena, online editor for the Research Department at the Federal Reserve Bank of Richmond.

Today's guest is Laura Ullrich, a regional economist based at the Richmond Fed's Charlotte branch. As part of her outreach activities, Laura has spoken to presidents and administrators at historically black colleges and universities throughout the Fifth District. She organized a panel discussion on HBCUs as part of a series of virtual events for Investing in Rural America Week in October 2020. We'll talk to Laura about her insights on HBCUs and their role in workforce development and the economy in general.

Thanks for being here, Laura.

Laura Ullrich: Thanks so much for having me, Charles. It's great to talk to you.

Gerena: Let's start with a little bit of history. The U.S. Supreme Court opened new doors to learning for Black Americans in 1954 with its historic ruling in Brown v. Board of Education of Topeka, Kan. But before that milestone, HBCUs played a major role in educating blacks. Tell us more about that.

Ullrich: Yeah, absolutely. I think this is a really interesting part of the history of our region, in particular.

If we go back in history to [the] Civil War era, HBCUs were primarily created after the Civil War because blacks weren't allowed to attend historically white universities. Before the Civil War, there were some schools in the U.S. that had opened to focus on black students. But, as you can imagine, in pre-Civil War United States, these were controversial at the time. To my knowledge, none were created below Washington, D.C.

In the southern part of the United States, which is where most of the Fifth District is, there were not institutions that focused on educating black students. In fact, even in the northern part of the United States, very, very few blacks attended college prior to the Civil War.

The first known black American to accomplish attending college was John Chavis. He actually did go to Washington and Lee in Virginia in 1799, which is really interesting. Alexander Twilight was the first black American to graduate with a bachelor's degree and that was at Middlebury College. That wasn't until 1823.

Right after the Civil War, a lot of HBCUs were open, namely between about 1865 and 1900, to educate black Americans, including those who were newly freed.

The first official HBCU was established in Pennsylvania in 1837. It was known as the African Institute. It still exists today, but now it's known as Cheyney University. Its mission was to train freed black Americans on basic skills they needed to obtain employment. It was basic skills such as reading, writing, because many of the freed slaves had not attended any form of formal education at that time.

Gerena: That is certainly interesting background.

Flash forward to today, the Fifth District is home to about one-third of the nation's HBCUs, from well-known institutions like Howard University in Washington, D.C. to some lesser known but equally important schools like Elizabeth City State University in North Carolina and Voorhees College, for example, in South Carolina.

Why are there so many HBCUs in the Fifth District?

Ullrich: Yeah, great question.

If you think about post-Civil War, at that period of time most of the black Americans lived in the South. In fact, 89 percent of the black population resided in the South in 1910. About 30 percent of the black population resided in the geography that makes up the Fifth District. So it actually makes sense that [if] 30 percent of the black population lived in the Fifth District, we have about 30 percent of the HBCUs.

The first HBCU in the Fifth District was the University of the District of Columbia, which still exists today. That was established in 1851, but was then known as the Minor Normal School, and that was set up to specifically educate black women at the time.

The first HBCU in the South wasn't created until after the Civil War. And honestly, Charles, this is one of the things that I think is so interesting. If you think about all of the destruction that occurred across the South towards the end of the Civil War and literally in 1865, the very same year the Civil War officially ended, Shaw University was opened in Raleigh. And it was opened by the National Baptist Convention and it was the first HBCU in the South. It's really incredible to me how quickly once slavery was put to an end at the end of the Civil War that we then decided we needed to educate blacks in the South.

Then there were a whole slew of HBCUs that opened in the South after that time. Most of them were opened by religious denominations. For example, Barber-Scotia [College] in North Carolina, which is still around, was opened by the Presbyterian Church and Benedict College in South Carolina was established by the American Baptist Churches USA. Most of them were started by religious denominations who wanted to create schools to educate their members.

Gerena: There's definitely something of a variety of institutions [that] have developed over the years in the Fifth District, and now you have a wide variety of other choices for post-secondary education.

Given that landscape, what makes HBCUs stand out today?

Ullrich: I've actually spent a lot of time thinking about this myself, as I've done some research on it. And I've also had the pleasure of visiting several of them pre-COVID when I used to travel around the district.

At the beginning of the existence of HBCUs, they really were created because blacks weren't allowed to attend other colleges, so they didn't have the same universe of schools to choose from. However, nowadays, students can choose to attend any college. Race is not a limiting factor in terms of admissions. However, you still do see a high percentage of black students that choose to attend HBCUs.

Even though HBCUs represent only about 3 percent of higher education institutions in the United States, they still are responsible for a pretty high percentage of black bachelor's and graduate degrees. According to a report that I read that was done by UNCF and the American Council on Education, HBCUs award 17 percent of all bachelor's degrees earned by black students and 25 percent of bachelor's degree in STEM fields are earned by clack students. So, even today, and even though they make up a tiny portion of the overall landscape of higher ed, they still play a really important role.

I also think it's so interesting to point out another couple of statistics: More than 50 percent of black school teachers in the United States and 70 percent of black dentists and doctors earn degrees from HBCUs. While students today have full choice of attending different colleges and universities across the district and across the country, HBCUs still play a very, very important role in educating minority students in the U.S.

Gerena: So why do so many black students continue to enroll in HBCUs in these numbers?

Ullrich: Some of it is tradition. In my family, just about everybody attended the University of Georgia. So when it was time for me to go to college, I wanted to attend the University of Georgia, too. So some of it is history and tradition within families. Because these schools have always educated a significant portion of black college graduates, it makes sense that many black students' families attended these schools, and so people continue to want to attend them.

But I think it's much deeper than that as well. A lot of it is because of the opportunities that HBCUs offer students who attend there. And when I say opportunities, I mean academic opportunity, cultural opportunity, and the opportunity to learn from and amongst black students and professors.

The author Ta-Nehisi Coates in his book "Between the World and Me," he describes what it was like for him growing up in Baltimore, Maryland, and then moving to attend Howard University in D.C. He talks about how, even though it was not that far apart geographically speaking, it was worlds apart for him in terms of the level of engagement he felt. He talks about learning from professors that looked like him and meeting people that were interested in everything from Russian poetry … to politics to other things that he hadn't been [exposed to] in that sort of environment in Baltimore where he grew up.

I am involved with the North Carolina A&T team at the Fed that recruits students there and helps students there. I was doing a resume drive and there was a student from the West Coast that was attending North Carolina A&T and she was majoring in computer science. I asked her what brought you to North Carolina A&T, which is an HBCU, from the West Coast. She said, "I didn't want to be the only person that looked like me in the computer science classes that I took." And I think there's a lot of value in that — to have fellow students and professors that that you can identify with is a real draw for students, just having the opportunity to learn in the same place that so many black leaders have learned before you.

You look at leaders within [the] business or political or entertainment or civic communities in the black community, a lot of them are HBCU graduates. Some really common examples: Most people probably know now that our vice president, Kamala Harris, attended Howard University and you've got people like the writer Toni Morrison [and] the actor Chadwick Boseman [who] all went to Howard. Wanda Sykes, the comedian, she went to Hampton [University] in our district. If you look even at our own board of directors, we have two members of our board of directors that went to an HBCU: Wayne Frederick, who's actually the president now at Howard, and Jim Sills, the CEO of a bank.

I'll point out to you that one of the things I've learned — especially in the smaller towns that have HBCUs — is that while HBCUs contribute obviously to the education landscape across the country, they also play a really significant cultural role in the areas where they're located. In our panel last year, Voorhees College — which is in Denmark, South Carolina, a very small rural town — their president remarked about what an important role they played in terms of providing the community with musical performances and plays to attend and sporting events. A lot of what goes on in Denmark, South Carolina is related to Voorhees College.

Gerena: All those things sound like HBCUs bring a lot of added value into the higher education market.

It's definitely a very competitive market these days. You read about various factors impacting higher education industry. Are there any unique market pressures that the HBCUs face?

Ullrich: Yes, absolutely.

In our recent District Dialogues series that we did — if people are listening and they haven't taken a look at that, I highly recommend it — one of the interviews I did was with Wayne Frederick, who's the president of Howard, and he pointed this out: Overall, HBCU students are much more likely to qualify for Pell Grants than students at other colleges. (The Pell Grant is for students who have lower family incomes.) They're also more likely to be first-generation college students. Seventy-one percent of full time degree seeking students at HBCUs qualify for the Pell Grant and 52 percent are first-generation college students. These students tend to have higher levels of need than students that aren't first generation and don't qualify for the Pell. That is a strain on these schools because they can't just raise tuition and expect to bring in additional revenue because of that.

Another issue that they have is that HBCUs tend to have much smaller endowments than other similar schools, than their non-HBCU peers. According to something I read recently by Marybeth Gasman at the Rutgers Center for Minority Serving Institutions, their endowments on average are 70 percent smaller than similar schools.

I looked a few up to give as examples. Take Howard, for example. Howard is arguably the most well-known HBCU in the United States. It has a stellar academic reputation. As of June 30, 2020, their endowment was worth $712 million, which sounds like a lot of money. But as of the same day, if we look at similar schools that are close to them geographically, kind of comprehensive private universities, you've got Georgetown and George Washington that are close. Georgetown University's endowment was $1.9 billion in George Washington's was $1.8 billion, so much, much larger.

Let's also think of smaller HBCUs. Take Fayetteville State [University] in North Carolina. They have 6,700 students. As of June 30, 2020, their endowment was only $24.8 million. That's about $3,700 a student. Western Carolina [University], another mid-size state institution but not an HBCU, in North Carolina has an endowment of $89 million. That's about $7,300 per student. So it's about double per student.

The reasons are what you would expect, right? Some of these schools were open way before the HBCUs. Georgetown University had been in existence quite a while before Howard opened, so their endowment just had more time to grow. In addition, many predominantly white institutions had either really large state appropriations when they were opened or very, very wealthy local benefactors. Think about the Vanderbilts, the Dukes that helped be benefactors to start very large, private institutions.

The beginnings of HBCUs were very different. They were started in the post-war South, mostly by religious groups, and they have historically educated students from lower income families. So they just didn't start with the same amount of money in the kitty. And because they have historically educated lower income students, they don't have as wealthy of an alumni base from which to raise money. So their endowments are much smaller.

Gerena: It sounds like significant disparities that HBCUs have to face, on top of the challenges that impact many private, smaller colleges and universities.

Ullrich: Yeah, they have a lot of the same economic hardships that other colleges face, especially the smaller ones.

I was in higher ed for 17 years before I came to the Fed and the recruitment of students is arduous and expensive. As you mentioned, there's a lot of schools competing against one another, right? Students have a lot of options. They can go to a lot of different schools, so just recruiting quality students is really difficult year to year. Every school deals with that.

But one big issue is that smaller, both public and private, institutions rely on non-tuition revenue at levels that can be disconcerting during a crisis, especially like something that happened with COVID-19. That's what we call auxiliary revenue. That would be things like room and board, the rental fees charged for spaces, things like that.

Smaller schools tend to rely on those types of revenues in higher amounts. That's partially because they don't have as large of endowments that they can earn money off of. They also tend not to have the research dollars that a larger research university would have. If you think about a very large research university, they might have a medical center they make revenue off of or they have large research grants for different labs that they can make money from. Some schools have sports teams that are so popular, they can make money from them. But smaller schools tend not to have those things. Instead, they have to rely more on auxiliary revenue. So, when something like COVID happens and you have to move all the kids out of the dorm, that becomes really, really expensive for these types of schools.

Gerena: You bring up a good point. A past issue of Econ Focus had an article that talked about the economic challenges that smaller institutions face, similar to what you're saying.

Speaking of the pandemic, how were HBCUs impacted last year?

Ullrich: COVID-19 impacted all educational institutions, from daycare to preschool to colleges. In the District Dialogues series, we did look at that whole path and how schools were impacted.

But there are some ways in which HBCUs were impacted more significantly, and one of them is related to the virus itself. COVID-19 disproportionately impacted communities of color. That's one thing we heard extensively through the interviews we did for District Dialogues — [school] districts that had higher percentages of minority students had more students that were kind of displaced because of the virus and more students who were learning from home and things like that.

Because of that, HBCUs were more likely to have students and employees who were directly impacted by the virus itself. And this, quite frankly, made many students and employees and the students' parents afraid of the students returning to campus. In that interview I mentioned with Wayne Frederick, he told us that at Howard, that absolutely impacted their decisions about class format. They knew that they had a lot of students that were afraid, and they knew that their students and employees were more afraid than at predominantly white institutions.

The second part is about that auxiliary revenues. When schools were closed in March, many colleges and universities had to make the very difficult decision to refund room and board expenses to students. There are schools in our district [where] more than 25 percent of their revenue comes from this, so the decision to give that money back was very expensive for these schools. The decision to do that was the right thing to do, right, because the students weren't living on campus. They weren't consuming the food. But it was really expensive for a lot of HBCUs.

And then there were more HBCUs that remained virtual in the fall because of those issues I mentioned where students were afraid to come back. If you remained virtual in the fall, you also couldn't charge students for room and board again. So while a lot of other schools were able to go back in person, at least at some level, many HBCUs chose to remain virtual and had to forego that revenue for fall 2020 as well.

Gerena: Have the recent rounds of COVID-19 relief funds from the federal government helped the situation at all?

Ullrich: Honestly, Charles, I think every conversation I've had with someone in education along the entire spectrum, the CARES Act money comes up. They say something like, "I don't know what we would have done without that money."

One of the real benefits, I think, was that the CARES Act was passed quickly and the money did get to institutions and students really rapidly. Part of the money went directly to students for direct relief. And then part of the money went to the institutions. They absolutely needed that money … it helped immensely. They will get additional money now from the newest stimulus, and my understanding is that many institutions will get more than they got in that first round of CARES funding. It comes with a timetable, it has to be spent in a certain amount of time, and there's limits to what they can spend it on. So it provided a lifeline to universities at a time when they really needed it, especially the institutions that can't rely on their own endowment revenue.

The bleeding hasn't stopped yet for these schools. Enrollment is down overall nationwide. I have talked to several HBCUs that are seeing increased enrollment, which is great news. But overall, higher education enrollment dropped for this school year, for 2020-2021, and I think everyone that's involved in higher ed is kind of holding their breath to see what happens this fall. They're just not quite sure. Applications are up almost universally, but it also looks like students applied to more schools this year, maybe because of uncertainty, so they're not sure it will translate into more students. So, even though I think all of us are starting to see light at the end of the tunnel in terms of COVID, the bleeding hasn't stopped yet for these schools.

One last thing I'll say about that is — having been in higher ed I know this well — if you have a really bad year in terms of enrollment, that revenue loss lasts for the next four or five years while those students are still there. If you have a really small freshman class one year, it's going to be a small sophomore class, small junior class, small senior class. So it's not like you have one year of an impact. It's gonna take several years for that to filter through.

Gerena: I think you've put us in a good mindset in terms of a future mindset. I guess we'll wrap up by looking forward. Based on the conversations you've had with both administrators and experts in higher education, what must happen for HBCUs to not only survive, but also to thrive?

Ullrich: I think in a lot of ways, in this regard HBCUs are very similar to other higher ed institutions. In order to remain flourishing institutions, above everything else, they've got to recruit high quality students. There's an intense competition for these students, and it seems to get more and more intense every year. So HBCUs are going to have to spend considerable amounts of money and energy recruiting these students.

But there are other ways in which HBCUs are different and have different needs in order to be successful. Because they educate higher financial need students, their students are really sensitive, either to tuition increases or room and board increases, or also to any kind of economic hardship.

We're hearing a lot from an economic point of view about how employment and high-wage jobs has more than recovered at this point compared to pre-COVID level. But it's lower wage jobs where employment really lags, and students at HBCUs are more likely to be from families where people work in lower wage jobs. Those families are going to have more economic hardship than high-wage families. So any expansion of the Pell Grant or expansion of federal loan programs or anything like that, HBCUs would see a large benefit.

Beyond that HBCU officials, like a lot of the administrators I talk to, tell me they want a broader audience to understand the importance of their institutions. That's been a real pleasure for me. I grew up in Georgia. A lot of my friends from high school attended HBCUs. I knew people in graduate school who attend HBCUs. And of course, a lot of my friends at the Fed attended HBCUs. So I've always had an appreciation for them. But really, until the last couple of years, as I've done this research at the Fed, I didn't understand the historical importance of these institutions. I didn't understand how they were created. I didn't understand the roles they play in the communities where they are.

I think that story is really well known within the black community. I also think it's well known in the towns where the schools are located. But many other individuals, including myself two years ago, and certainly including some policymakers may not be as familiar with this story.

Gerena: Laura, thank you so much for sharing the story of HBCUs with us today.

Ullrich: Thanks so much for having me today.

Gerena: For listeners who want to learn more about the evolution of HBCUs, I would encourage you to check out the Economic History feature in the Summer 2004 issue of Econ Focus.