The United States Department of Education has released a package of regulations aimed at protecting beneficiaries of federal student aid, including rules that will prohibit most transcript withholding for individuals who owe money to their former college or university. The department’s action is a cause for celebration for those who support student success, educational attainment, and workforce development. The new restrictions on transcript withholding will severely limit an unfair practice that has prevented many thousands from proving their educational achievements to employers or other colleges.
At the same time, prohibiting transcript withholding is an incomplete solution to the multitude of challenges that institutional debt imposes on both students and colleges and universities. We must build on the momentum of the new federal regulations and highly promising institutional and state programs to address the roots of the problem: resolving the institutional debt and providing clear, supported pathways back into higher education.
The regulations — which go into effect July 1, 2024 — require colleges and universities to provide transcripts for terms in which students received federal financial aid and paid off the balance. In other words, an institution may only withhold the portion of a student’s transcript for academic terms with an unpaid balance or during which no federal aid was received, rather than the entire transcript. Another new regulation prohibits transcript withholding or any other negative action when the unpaid balance is the result of the institution’s mistake. Determining whose and what portion of a transcript to release will be administratively challenging for institutions, and we anticipate that most institutions will decide to cease to hold transcripts for students who owe a balance entirely.
The likely end of most transcript holds is an important improvement for at least 6.6 million individuals who owe money to a former college or university and have “stranded credits” as a result. It means that debt will no longer prevent them from taking a job that requires an official transcript, or from enrolling at a new institution to continue their education. It means they will no longer be prevented from confirming and benefitting from the record of their actual academic achievements — proof of what they know and can do — merely because they were unable to pay part of a term bill or a library fine.
As exciting and impactful as this regulatory change is, there is more work to be done. The millions of individuals with some college, no degree, and institutional debt face other, significant financial and administrative barriers to completing a credential and getting on firmer financial footing.
In addition to transcript holds, colleges and universities typically place a registration hold on the accounts of students who owe a balance, meaning they cannot continue their studies at that institution until they pay the balance. And even with access to their transcript, many students will find that their credits earned from a prior institution do not count toward their desired degree at a new institution, or are not accepted at all by that institution.
Furthermore, institutions on their own and sometimes in conjunction with state agencies frequently employ debt collection practices such as imposing fees and interest, reporting the debt to credit rating agencies, contracting with a debt collection agency that imposes its own fees, garnishing state tax returns, and suing to garnish wages. All of these practices impose significant financial hardship on the students, which also puts continuing their education further out of reach. We can expect institutions to continue these practices, even in the face of a transcript withholding prohibition, as evidenced by the behavior of institutions in states such as Washington and California that prohibited transcript withholding several years ago.
These debt collection practices are harming the students who owe a balance. But they don’t provide much benefit to the institutions that use them — institutions typically collect only a fraction of the nominal value of the debt. They are also preventing students from returning to higher education at a time when many colleges and universities are concerned about enrollment declines.
Ultimately, breaking out of this lose-lose situation requires a multi-faceted intervention that resolves the debt and includes robust outreach and holistic support for returning students.
Fortunately, there are a number of examples of effective programs that combine outreach, coaching, and debt resolution, such as Wayne State University’s Warrior Wayback and Ithaka S+R’s Ohio College Comeback Compact, as well as efforts to make credit transfer more transparent and equip returning students with information to plan, such as CUNY Transfer Explorer. The more institutions, consortia, and states that introduce programs with these elements, and the more of these programs are aligned cross-institutionally to provide a network of coherent opportunities for returning students, the more fully we can realize the potential of this moment.
It is in everyone’s best interest to minimize the financial and administrative barriers for returning students to earn a credential. Doing so transforms that student’s life and career; colleges and universities can better meet enrollment goals; and the local and regional workforce is better prepared. The Education Department’s broad prohibition on transcript withholding is a great first step and inspiration to go the rest of the way.
Martin Kurzweil is vice president, educational transformation at Ithaka S+R. Elizabeth Looker is senior program manager at Ithaka S+R.