Transcript Holds Might Be Loosened, But Only If Your College Messed Up

Over the past three months, the Department of Education (ED) has been working to craft new regulations governing federal financial aid programs. One area for discussion has been the agreements that institutions must sign to participate in federal financial aid programs. These agreements set out the rules that institutions must abide by for their students to be considered eligible to receive Title IV financial aid. While not initially included in the list of issues up for discussion, multiple negotiators representing students pushed ED to include a ban on transcript withholding in the regulations, arguing that the continued widespread use of transcript withholding was harming students and reducing the impact of the investments made in students through federal student aid programs. Now, for the first time in regulation, ED has made clear in its draft language that institutions cannot withhold transcripts in certain situations. It’s a step in the right direction but falls short of the needs of students.

There are no reliable national data on how many transcripts holds result from institutional errors. However, we know that around 6.6 million students whose credits are stranded due to transcript holds, so this rule has the potential to help hundreds of thousands of students, even if just a small percentage are affected by institutional errors. Restoring access to transcripts could help those students access better jobs, return to college to complete their education, and lift the frustration and weight of not being able to prove the learning and skills they gained while attending college.

What does the new rule look like?

The provision ED included in the latest proposal was much narrower than what multiple negotiators had suggested. Negotiators had requested a broad regulation that would ban institutions participating in the federal financial aid programs from using transcript holds as a collections tool under any circumstances. Negotiators representing students wanted a rule similar to California's recently enacted ban on transcript withholding. negotiators representing colleges and universities pushed back on the plan, noting their sympathy for the plight of students who were unable to access their transcripts, but argued that negotiated rulemaking was not the correct venue for a decision on transcript withholding.

Institutions maintain that transcript withholding is one of the few tools they have to collect on debts students owe to the institution and that it is preferable to sending students straight to collections. However, research shows that transcript withholding is not very effective as a collections tool, with an average of seven cents on the dollar recouped. A new approach is being trialed in Ohio to help institutions re-enroll students, clear their debts, and help the institution recoup some of the forgiven debt.

While far narrower than what was hoped for by student advocates, the current regulatory proposal put forth by ED would improve the status quo for students. ED representatives noted that they believed they do not have the legal standing to ban transcript withholding broadly without a direct connection to Title IV aid programs. Instead, the new regulation proposed by ED will ban transcript withholding when a student has a debt that has been created as a result of an error made by the institution.

Who benefits from less transcript withholding?

The proposed rule will help students avoid transcript withholding in some situations. For example, this can happen when a college makes an error in how much financial aid they have awarded the student and are required to correct the mistake. Previously, even if a student owed funds to the institution because of an error, the student's transcript could still be withheld. Additionally, a recent report on Veteran students' experiences with transcript withholding found that 35% of the holds were related to inaccurate billing or other disputed issues, and 20% were related to predatory or deceptive practices. These are both areas that would likely be covered by the new rule as it currently stands, preventing students from being penalized for errors made by their institution.

While the proposed regulatory text is far from perfect and still needs to make it through the rest of the rulemaking process before it becomes final, it is a step in the right direction that will help a lot of students access their educational records.

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