Kentucky State University is kicking out a quarter of its students for failing to pay their bills.

The public historically black university announced Wednesday that 645 current students with unpaid bills are responsible for a $7 million deficit. So those students -- about 25 percent of the college's population -- are being dropped two weeks into the school year.

Kentucky State's interim president, Raymond Burse, who started the job in July, blamed broken policies at the university. Students have been allowed to attend, leave with unpaid bills and then re-enroll without paying up

“When I was in school, you were not in school until you had met all of your obligations, until you had done all of your enrollment things and had paid your financial obligation,” he said.

Not so at Kentucky State. Rather than collecting money upfront from students, Burse said, the university had been trying to collect its money on the back end and then “chasing” students.

Aaron Thompson, the chief academic officer for Kentucky’s Council on Postsecondary Education, said other colleges in the state system have had to drop students because of unpaid bills but the drama at Kentucky State was magnified by its relatively small size.

About 195 of the Kentucky Students being asked to leave are already living in campus dorms, Burse said.

All told, the university is owed $13 million by current and former students who have unpaid bills, the president said.

The university said in a statement that its effort to collect from students had begun under the previous president, Mary Evans Sias, who retired in June. A call to Sias’s home was not answered Wednesday afternoon.

Burse said the university will work to step up its student recruiting but is bracing for a $10 million shortfall this year because of the students he is dropping. That’s about a fifth of the university’s $53 million annual budget.

The shortfall could force furloughs and across-the-board pay cuts. The president said the university is not using adjuncts, may reduce classes and change professors’ course loads, and will take a look at its “top heavy” administration.

Kentucky State tried to spare some students. It took $160,000 from endowment funds to keep about 150 students in class. That money was used to pay off the balances of 111 students who owed less than $1,000 and to give $65,000 in scholarships and textbook vouchers to 42 students who could graduate this year or are first-time students.

Thompson, the Kentucky higher ed system official, said Kentucky State officials will now need to adjust to a new financial picture.

“When they look at their student body that is going to be there and that they can depend on, they’ll need to know what kind of resources they’ll have to employ the faculty needed, and to make sure the classes are offered to make sure the students get what they signed up for,” he said.

The reaction among non-administrative types at Kentucky State was unclear. A student government representative declined to comment because she has a seat on the college’s Board of Regents. The head of the Faculty Senate said in an email that the body had not yet met to discuss the matter and would not do so until next week.

There doesn’t appear to be good recent data on currently enrolled students who owe their colleges money, but the problem could be particularly acute at historically black colleges and universities.

Tiffany Jones, a postdoctoral research and policy analyst at the Southern Education Foundation who studies HBCUs, said other campuses have students who don’t qualify for loans, but HBCUs serve more low-income students who don’t qualify for loans.

“Plus,” Jones said, “these institutions lack the endowment and other institutional resources necessary to fill those gaps, to keep them enrolled when it comes down to $3,000 keeps a student here or not.”

Michael Reilly, executive director of the American Association of Collegiate Registrars and Admissions Officers, said he’s not seen any enrollment purges on the scale of Kentucky State’s. He said it’s unusual for a campus to allow students to continue to enroll if they have unpaid bills from a prior term.

“That must be the case at KSU for students to accrue such large bills,” Reilly said in an email. “Perhaps they felt they were giving students the benefit of the doubt, but the debt burden creates other challenges and shouldn't be considered a good practice.”

Other public HBCUs have been struggling. Also on Wednesday, Fort Valley State University, an HBCU in Georgia, announced it too had a $7 million deficit and was planning layoffs, a local television station reported. Moody's Investors Service said Wednesday night it was reviewing the university's credit rating for a downgrade because of "deep" declines in enrollment, including a 24 percent loss of students since last fall, when Fort Valley had about 3,200 students.

Johnny C. Taylor Jr., the president and CEO of the Thurgood Marshall College Fund, saw the Kentucky State and Fort Valley State announcements as two sides of the same coin: “predictable” consequences of tightened eligibility requirements for federal Parent PLUS loans, which were used by many HBCU students’ families to pay for college.

HBCU leaders have called the 2011 changes a “crisis” that limits students' access to higher education.

“The result is the same in both institutions: one is going to drop them; one is going to keep them from coming,” Taylor said.

While Fort Valley did partially blame the loan requirements, Kentucky State’s president said he was “not certain” how much was solely attributable to the changes.

Taylor also sees long-term problems on the horizon for Kentucky State and other institutions he says may soon face the same fate.

First, Kentucky State’s six-year graduation rate is already 25 percent.

Second, the federal government can also yank financial aid from colleges if a third of borrowers default within three years of when they begin to repay their loans. At Kentucky State, 25 percent of recent students are already in default by federal standards. It is unclear how many more will default in the future.