Saint Augustine’s University (SAU), a private Historically Black College and University (HBCU) in Raleigh, N.C., announced on December 11 that it had been removed from membership with the Southern Association of Colleges and Schools Commission on Colleges (SACSCOC), a first step toward the revocation of its accreditation. Although the decision was not final and will be appealed by the university, the accreditation action is the latest in a series of financial and institutional setbacks suffered by SAU in recent years.
Saint Augustine’s is just the latest HBCU to face existential financial difficulties.SACSCOC’s latest announcement follows an action in December 2023 in which the organization removed SAU’s accreditation and then held the removal in abeyance during the school’s appeal. Sadly, SAU is just the latest HBCU to face existential financial difficulties. As I have written, the trends in college and university tuition discounting show that the business model of many less-selective private institutions is under severe stress, but HBCUs are facing a unique set of circumstances that have placed many of them in financial extremis.
The mission of America’s HBCUs is an important one in our country’s higher-education universe. Many such schools have provided college educations for African-American students for over 150 years, including during eras when other institutions wouldn’t take those students. Today, HBCUs undertake to provide education for many economically and academically needy students in a time when even well-resourced institutions are struggling. Unfortunately, this almost heroic undertaking faces structural headwinds that have put many HBCUs on the brink of failure.
In recent years, several HBCUs have closed, merged, or lost their accreditation. St. Paul’s College (2013), Concordia College Alabama (2018), Saints College (2006), Mary Holmes College (2005), Lewis College of Business (2013), Morristown College (1996), Prentiss Institute (1989), and Bishop College (1988) have all closed in recent years and decades. Other schools such as Morris Brown College, Knoxville College, and Barber-Scotia College continue in a limbo of minimal enrollment and uncertain funding. About 10 percent of all HBCUs (there are 104 as of the fall of 2024) are on the Department of Education’s “heightened cash monitoring” list as a result of
compliance issues including but not limited to accreditation issues, late or missing annual financial statements and/or audits, outstanding liabilities, denial of re-certifications, concern around the school’s administrative capabilities, concern around a school’s financial responsibility, and possibly severe findings uncovered during a program review.
SAU has been on this list since September 2022 due to missing financial-statement audits.
Many HBCUs start from a difficult financial position. They generally have small endowments, their students are mostly needy and are therefore “full payers” at lower rates, and their alumni giving is typically low. Having students who need large loans to enroll handicaps graduates with large loan payments, so they are less likely to be able to afford to donate to their university. In addition, graduation rates from HBCUs are much lower than the national average (in 2024, SAU had a 19-percent graduation rate per the College Board), so they have fewer alumni graduates to draw on for donations.
“Full-pay” students are a linchpin of most private institutions’ budgets. These students do not get institutional discounts or scholarships and therefore increase the net tuition that flows into the university budget. The absence of many “full payers” means that most HBCUs are heavily dependent on total enrollment to meet their budgets. Any problems that reduce their admission applications and matriculations, such as accreditation issues, are going to put them in desperate circumstances.
Any problems that reduce HBCUs’ admission applications are going to put them in desperate circumstances.The federal government made things much worse in 2011. That year, the U.S. Department of Education added new underwriting standards for the PLUS loan program for parents and graduate students. Ostensibly meant to restrict borrowing at for-profit colleges, where students often left school with no degrees and high debt, the changes inadvertently redounded on HBCUs. The new stricter rules on awarding loans put HBCUs and their students in a tighter bind. According to a Department of Education study, the number of PLUS recipients at HBCUs declined substantially (minus 46 percent) in the year following the changes, more than at other institutions, and other federally funded loan programs did not make up the difference. Enrollment at HBCUs declined by 3.4 percent that year, while other institutions as a whole showed a small increase.
In the fall of 2012, for example, Howard University had more than 600 students denied PLUS loans, putting the institution’s budget in peril. HBCUs lost an estimated $168 million as a result of the large number of students who were no longer able to start or finish their college education. Then, in 2020, Covid hit, and although Congress provided large stopgap funding for higher education (including $6.5 billion for HBCUs), those funds are gone now, and many institutions were left with lower enrollments.
SAU’s own travails go back to at least 2021, when the institution stopped producing audited financial statements. Since then, the university has tried to turn things around by shaking up the senior administration, negotiating for a series of loans, and laying off half of their staff and faculty.
Failure to produce financial statements is a red flag for any organization and is the proximate cause of SAU’s accreditation woes and heightened Department of Education scrutiny. Such failure is often a marker for poor management. It is very difficult to navigate financial problems if management doesn’t have accurate information or solid financial processes. The financial statements from the 2020-21 academic year show that SAU’s net assets declined by $6.7 million, or about 18 percent. Things seem to have gotten worse since then. It has been reported that SAU had a $6.4-million deficit last year and a $9.1-million deficit in the 2022-23 academic year.
Attracting strong financial management to non-profit organizations is an acute problem. A person with the skills and experience to manage extreme financial problems at an organization such as SAU can attract double or triple the salary that SAU is able to offer. It is easy for an organization to fall into a downward spiral, in which poor budgeting and cash management lead to financial problems, which require even more skill and attention to reverse. Weak or inexperienced management at that point tends only to make things worse.
One thing we do know about SAU is that it has had a sharp enrollment decline: 766 students in fall 2024-25 versus 1,110 in 2020-21 (minus 31 percent). As mentioned above, unless a small private university has a large endowment or very generous donors, its finances are going to be enrollment driven. The aforementioned deficits are reflective of a decline in tuition revenue. The university’s debt for the 2020-21 year was not out of line with many small privates—a 25-percent debt-to-asset ratio. Since then, however, it has been reported that several large loan agreements have been signed, including a $7-million line of credit in 2023 from a venture capital firm at an exorbitant rate of 24 percent. The institution’s total debt has reportedly ballooned from $16 million to $30 million in the last three years.
HBCUs need to build financially stable operations under good leadership and rebuild their brands.While SACSCOC has not made public its specific reasons for taking action against SAU, it is easy to see that an enrollment-driven school with sharply declining revenues and increasing debt is in an existential financial crisis. (A recent summary in the Chronicle of Higher Education details the desperate steps that the university has taken to survive in the past year.)
What is the way ahead for struggling HBCUs like SAU? Philanthropists, non-profits, and state and federal governments have stepped in recently to aid some struggling HBCUs with funding. But, in addition, these individuals and groups would be wise to help the institutions in question attract and retain top-quality leaders, who can set them up for growth and fiscal stability. Howard University’s growing enrollment and fundraising illustrate the benefits of recruiting strong fundraisers and business-oriented leaders to run colleges.
For institutions that make changes to stabilize their finances, there are alternative accreditors that may give them a fresh start. There’s nothing special about SACSCOC accreditation. Several HBCUs have moved to alternative accreditors already. The only important thing accreditation gets an institution is access to federally sponsored loan programs. In SAU’s case, dramatically cutting expenses and finding alternative revenue sources (such as a widely reported land-lease deal with a sports firm) are positive steps toward righting the ship and are an encouraging sign. Furthermore, the Supreme Court’s 2023 ruling (in Students for Fair Admissions v. Harvard) banning affirmative action in higher-education admissions is a potential boon to HBCUs, as some institutions have reported a significant increase in applications since then. One-time gifts from philanthropists or one-time loan deals are not going to solve HBCUs’ long-term problems. They need to build financially stable operations under good leadership and rebuild their brands.
Chris Corrigan was Chief Financial Officer at Andrew College (1998-2005), Emory College (2005-2008), and Armstrong State University (2015-2017).