Department of Education Limits Colleges' Ability to Hold Transcripts

This week, the U.S. Department of Education released new regulations that will increase consumer information and protection for students and reduce the likelihood that taxpayer dollars go to poorly performing and predatory institutions. This new rules package comes on the heels of robust Gainful Employment and financial value transparency rules that were finalized in September.

The package covers topics ranging from the administrative capability and financial responsibility of institutions to the agreements entered into between institutions and the Department. Yesterday, we highlighted the significant improvement the rules will bring to financial aid offers. Today, we are looking at changes that will prohibit colleges and universities from withholding students' transcripts in many circumstances.

The new transcript withholding regulations will ensure that students who have completed and paid for classes can access their transcripts even if they owe their institution money. The approach adopted by the Department is stronger than the solution offered at the proposed rule stage. This more robust revision adopts some of the recommendations New America made in our public comments on the proposed rules, and we are glad to see the Department considered those comments as part of its decision to strengthen the rule.

College transcripts are vital documents not just for students but also for employers and colleges. Students need them to show what they have studied and how they performed. Employers want them so potential employees can prove they have the qualifications they claim on their resume. Colleges need them to determine whether a new student should get transfer credit and whether they are still eligible for certain types of financial aid.

Many of the debts that lead to dropouts and blocked transcripts are for a few hundred dollars or less. Often, these holds prevent students from accessing higher paying jobs or completing their degrees—ironically, both solutions that would make them better able to pay off their debt to their school.

The new regulations require colleges to release transcripts for all enrollment periods the student received federal financial aid and paid their bill to the school in full. This means that the only credits a college or university will be allowed to withhold from the transcript or those completed in a semester where the student still owes money. For example, say a student has completed 50 credits of classes and then withdrew while owing a balance of $500 for a semester where they completed six credits. The school will have to release the student's transcript with the 44 credits they completed and paid for while receiving federal financial aid.

This regulatory change comes after several years of research, led by Ithaka S&R, a higher education research firm, showing that withholding transcripts impacts millions of students, is deeply inequitable, and is often an impotent approach for actually getting students to pay back funds they owe. Generally, schools collect less than seven cents on the dollar, according to Ithaka S&R’s research.

Colleges may raise concerns that limiting their ability to use transcript holds will mean they have to use more aggressive collection efforts to chase down students who owe debts. However, there is also growing evidence that colleges and universities have better options than barring students from accessing their transcripts. Programs like the Wayne State Warrior Way Back program and the Ohio College Comeback Compact have shown that colleges can do more to bring students back to higher education if they put in the effort. These programs have included forgiving institutional debts if the student re-enrolls at the school, or, in the case of the Ohio compact, any participating school. Evidence from these programs shows that bringing students back to college is good for the students who can complete their studies and brings in more revenue for the schools than they lose by forgiving the debts.

Ithaka’s research, and work from the Student Borrower Protection Center helped push 11 states, (New York, California, Colorado, Maine, Minnesota, Washington, Ohio, Illinois, Indiana, Connecticut, and Oregon) to ban the practice over the past two years. By creating a federal regulation, the Department is now ensuring that all students, not just those lucky enough to live in one of those states, are protected from transcript holds.

The Department should be applauded for enacting regulations that will benefit millions of students impacted by transcript holds and prevent future students from being harmed by the practice. These new rules should encourage more schools to find innovative and student-centered approaches that encourage re-enrollment and completion over punitive ineffective attempts to use transcript holds as a debt collection tool.