Oct. 20, 2022
The Consumer Financial Protection Bureau (CFPB) has released a report suggesting that transcript withholding is illegal if colleges and universities use it as a blanket approach to collect on debts owed to them. The report calls on schools to change their behavior or face consequences.
The report noted several troubling practices that institutions engaged in. These included collecting payments for a transcript and failing to provide it if the student was delinquent on a debt to the school. There was also at least one case of a school refusing to release transcripts once a student had entered into a payment plan—the school in question required students to completely pay off their debt before it would release transcripts.
The report states that “institutions took unreasonable advantage of the critical importance of official transcripts and institutions’ relationship with consumers.”
Ithaka S&R estimates that 6.6 million students in the U.S. have credits they cannot access because their former institution is holding their transcript to provide leverage in collecting unpaid balances. Some of these holds are related to large debts owed for tuition or housing, but many are for small sums. There are also profound equity implications for the most marginalized and disadvantaged students. Students of color are much more likely to have their transcripts withheld.
What is transcript withholding?
Transcript withholding is a long-running practice previously endorsed by the Department of Education (ED). ED’s position changed last year when Secretary of Education Miguel Cardona told college leaders they should stop withholding transcripts for unpaid balances.
Transcript withholding allows colleges and universities to prevent students from accessing their academic transcript as a tool to get them to pay debts owed to the institution, sometimes debts as small as twenty-five dollars. Without access to their academic transcripts, students cannot transfer credits to new schools, complete credentials, or prove to employers that they have completed college-level work.
Some states have banned transcript withholding out of concern that the practice does more harm than good. The Student Borrower Protection Center estimates that one-quarter of students go to college in states that ban transcript withholding. The issue has gotten a lot of attention this year, with New York public institutions banning the practice ahead of a new law that made it illegal at all New York colleges and universities. Ohio, Louisiana, Virginia, Maryland, and New Jersey have recently introduced bills prohibiting the practice.
Institutions argue that withholding a transcript is one of the few tools available to get students to pay back funds owed to the institution. The reality is that transcript withholding appears ineffective. In states like Ohio, where aggressive collection practices are allowed, only 7 cents on the dollar are reclaimed by transcript holds.
Transcript withholding creates potentially vicious cycles. Students need money to pay off debts owed to their institutions so they can access their transcripts. But they need the transcripts to enroll at new institutions to complete credentials that will help them get better-paying jobs or to apply for those jobs. Preventing access to the very thing that would make it easier for a student to earn more money is a counter-productive approach.
Why does this CFPB report matter?
The crux of the CFPB report is that whenever institutions of higher education (IHEs) provide an “extension of credit,” using transcript withholding to compel payment is illegal. IHEs extend credit in more circumstances than you might think. Tuition payment plans, institutional student loans—including emergency loans—and offering payment plans to deal with overdue tuition balances can all fall under the umbrella of extension of credit.
CFPB has not clarified whether withholding transcripts for smaller debts, such as library fines and parking tickets, is illegal. IHEs would benefit from more precise guidance in this area. It is clear that when a college extends credit to a student, they are likely breaking the law and need to find new approaches to encourage students to repay overdue balances.
Are there alternatives to transcript holds?
It is time that colleges find ways to support students in completing their degrees through creative and caring approaches rather than viewing immediate repayment of debt as the only viable option.
There is a risk that removing a school’s ability to hold transcripts could lead colleges to send students straight into debt collections, a more harmful outcome. But innovative work suggests schools have alternatives to collections if they are willing to consider them. The Ohio College Comeback Compact, Wayne State Warrior Way Back Program, and the University of Maryland Baltimore’s Finish Line program offer promising solutions that benefit students and institutions.
These re-enrollment programs offer support for students to complete their degrees, some level of institutional debt forgiveness and help the schools by increasing enrollment. These are the sorts of creative solutions institutions should look at as they move away from transcript withholding.
Ithaka S&R has been a leader in finding alternative solutions to transcript holds. Their proposals include re-enrollment programs, especially those that encourage regional collaboration between institutions, the forgiveness of small debts, and enhancing support for student basic needs to reduce the number of students forced to stop out, leaving them with institutional debt and no credentials.
Ending transcript withholding is the right thing to do, and in many cases, now comes with a legal imperative for institutions to change their approaches. Schools can do what is best for students and themselves by adopting innovative and caring practices. There are plenty of good ideas; schools have to be willing to embrace change.
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