Officials of Arkansas Baptist College sent me a note this morning saying they’d received word of approval of a $30 million federal loan that should right the finances of the historically black college.
I spoke with College President Fitz Hill and Trustee Beth Coulson last summer after some ill financial news. They were unable then to talk for the record about a plan that they believed would solve persistent cash flow problems that included lawsuits over unpaid bills and failure to pay unemployment insurance payments.
The college had been placed on heightened monitoring by the federal government, which provides most of the grants and loans that Arkansas Baptist students depend on for college costs. That slowed payment of federal checks, which in turned cause problems for students who needed expense money and for payment of the college’s bills, including payroll at times. A computer problem further complicated student loan complications.
I am awaiting a callback for more details on the latest news, including on the loan amount and terms. But such loans typically include an upfront period with no required payments. This gives the college breathing room to pay off existing bills as well as get lower cost financing for existing construction debt. It’s effectively a consolidation loan for all debt, with low interest, a long payback and a moratorium on payments. That frees a significant portion of previous debt-obligated cash flow for other immediate needs. I believe the loan comes from a federal Education Department program aimed at historically black colleges and universities.
The college has grown dramatically under Hill, including an ambitious construction campaign that has included buying property in the surrounding neighborhood as well as new campus buildings.
The college’s situation is already improving, according to court records.
Court records show that the state released a lien of $237,000 on unemployment payments Nov. 25. The college satisfied a $132,000 judgment by a financial services company on Dec. 2. A September claim for $13,000 by a janitor service is still pending as well as an $157,000 claim by a furniture supplier.
UPDATE: The loan is for $30 million at 2.8 percent interest. It’s repayable over 30 years. Trustee Coulson said the college’s bank loans were all paid off last Friday and she said all creditors will be paid in full by Jan. 30.
This is a big deal for Arkansas Baptist. Hill and Coulson emphasized to me in our earlier discussion that a federal loan would be a measure of the agency’s belief that it could sustain operations and repayment. Keeping the school full of students making payments with government loans and grants is important to that mission, one reason that Hill is in nearly constant recruiting mode.