General policies withholding transcripts are ‘abusive’, says federal agency

Broad policies to withhold transcripts from students with unpaid college debts are “abusive under consumer financial protection law,” the Consumer Financial Protection Bureau said. found Last week. Colleges should end this practice, the agency wrote in a press release on new direction for federal investigators.

The bureau found that transcripts due to a student’s late loan payments is a coercive practice with consequences “often disproportionate” to the student’s original debt. When students cannot obtain their transcripts, they are often unable to transfer to another institution, obtain professional certification, or seek employment in a field that requires college transcripts.

Until recently, keeping transcripts was an almost universal practice in higher education. Ninety-five percent of colleges use them, according to a recent study by the American Association of College Registrars and Admissions Officers. Now, some colleges are taking steps to limit or eliminate their use, especially as a growing number of states seek to ban the practice. The U.S. Department of Education largely declined to address the topic, a response some advocates called “lukewarm.”

Terri Taylor, director of strategy for innovation and discovery at the Lumina Foundation, has studied the effects of transcripts on equity and student success. She said many institutions have viewed the lockdowns as a mere warning, while some students view them as insurmountable obstacles.

“This problem, for many institutions, is not seen as a student success problem, but as a line on a balance sheet that their boards ask them about,” Taylor said. “You want students to know about their balances… But you don’t want to lose them over something that could be fixed.”

But according to Taylor, that’s what sometimes happens when students can’t reimburse their institutions and remove the deductions. A 2020 Ithaka S+R Studythe research division of a nonprofit education group, estimated that 6.6 million people have “locked credits” – academic credits they have earned but cannot use.

Such catches disproportionately affect students of color and those from lower socioeconomic backgrounds, a study 2021 found. Sosanya M. Jones, one of the study’s authors and associate professor of higher education, leadership and political studies at Howard University, said that because transcripts hinder economic mobility, they create a vicious cycle for low-income students.

Some of those students “who don’t pay their debts aren’t going to start paying their debts because of a holdback — they just can’t afford it,” Jones said.

“A self-fulfilling prophecy”

The office’s conclusions follow its announcement in January that he would investigate colleges that provide private loans to students. Private student loans have long been a concern of the bureau, which in 2013 conducted a survey of students struggling with private loan debt and found that private loans often offer fewer consumer protections than federal loans.

A senior researcher at Ithaka S+R, Sarah Pingel, said the blocked credits are basically “a self-fulfilling prophecy”. Limitations around not being able to get a transcript can make paying off debt even more difficult for many borrowers, she said.

The bureau’s findings were hailed by the Student Borrower Protection Center. Winston Berkman-Breen, its deputy director of advocacy and policy advice, said access to previously denied transcripts could be a boon to borrowers who had previously been denied them.

“Hiding in plain sight for so long was just considered business as usual until recently,” he said. “We can finally call it abusive, this Catch-22 where we are withholding this document from you because you owe us money. But by withholding it, we prohibit you from completing your education, getting that job, and earning the money you need to come back and pay us the debt.

In its findings, the bureau cited some specific abusive practices. At one institution the bureau investigated, transcripts were not released until balances were paid, even when students made new payment arrangements.

“In some cases, the institution collected payments for transcripts but did not deliver those transcripts if the consumer was in default,” the bureau said.

Eight states have already prohibited the transcript holds in certain scenarios. California has the strictest law, prohibiting public and private colleges from withholding a transcript when a student has an outstanding balance. Some laws in other states specify certain situations in which transcripts cannot be refused, such as when the student is pursuing an employment opportunity. A few other states, including Tennessee, require state colleges to place transcript holds in certain scenarios.

Some higher education systems have even taken the plunge, eliminating the practice before their state. In January, after the Governor of New York said she would ban the practice statewide, the State University of New York system immediately arrested withhold transcripts from students with outstanding balances.

Pingel noted that the bureau’s findings don’t extend to students who don’t pay the balance of their tuition or minor fees like the cost of a lost library book.

An office official said The Chronicle that its conclusions are not intended to be exhaustive; rather, they show the results of investigations in various institutions while maintaining confidentiality. The findings were part of a process to inform reviewers on how to investigate possible breaches of consumer financial protections. By releasing the findings, bureau officials hope to help higher education leaders examine their own policies and better comply with federal consumer protection laws.

While the scope of the bureau’s findings is limited, Berkman-Breen said, their implications could extend beyond colleges that provide loans directly to students.

“The practice of withholding transcripts, diplomas or other important educational documents occurs everywhere whenever an institution has a debt,” he said.

“More extreme measures”

Several organizations spoke out against the bureau’s findings. Career Education Colleges and Universities, a national organization that primarily represents for-profit colleges, said the office exceeded its authority and failed to use proper rule-making procedures.

“Instead of engaging institutions, engaging lenders, engaging the public on this practice of withholding transcripts, they’ve incorporated a new interpretation of the law into a guide for their reviewers, which is a really terrible way to make policy,” said Nicholas Kent, the group. policy director.

The Coalition of Higher Education Aid Organizations also spoke out against the findings, saying it denied a key debt collection method for a number of institutions. According to Lori Hartung, chair of the coalition, colleges have few other ways to motivate students to pay once they graduate or leave the institution.

Hartung said the findings don’t provide much clarity for colleges trying to comply with federal consumer protections. The office has not defined what a “general policy” for transcript holds is, or whether holds may be appropriate in certain scenarios.

The office manager, who spoke with The Chronicle on condition of anonymity, declined to provide clarification.

The office’s findings were specific to certain institutions, the official said, because investigations are conducted on a case-by-case basis.

Hartung also said that without the option to retain transcripts, some institutions may have to turn more quickly to more aggressive collection measures. “They start reporting the delinquent accounts receivable to the credit bureau or send the unpaid accounts receivable to a third-party debt collection agency,” Hartung said. “But usually it’s more extreme measures after a period of time where the school is trying to facilitate payment in a simpler way.”

But Pingel, the Ithaka S+R researcher, said there was little evidence that any of these methods, including transcripts, were effective in collecting overdue debts. Based on the limited data available, she said, sending student debt to a collection agency ends up being “penny on the dollar based on the actual face value of the debt.”

Jones, the Howard University researcher, is investigating other ways to fairly solve the problem of blocked credits. She said debt relief programs that allow students to re-enroll while paying off their debt in manageable installments are one possible avenue.

Jones said she hopes the bureau’s findings will “actually help move the conversation forward.”

“This is a victory for a student and their rights and ownership of the credits they have earned,” she said. “It also raises awareness of the devastating effects of failed credit on all facets of a student’s life.”

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