College transcripts are often held hostage by universities and colleges if students have outstanding balances on their accounts. This practice has been the subject of debate for many years, with students and advocates arguing that it unfairly punishes students for financial struggles beyond their control.
Every July 1, significant changes are implemented in the federal student aid program, impacting millions of students and graduates nationwide. This year is no exception, bringing a major update that could affect approximately 6.6 million former college students with "stranded credits" due to unpaid balances to their institutions. These figures and the term "stranded credits" come from a 2023 study by Ithaka S+R.
Starting this July 1, colleges participating in federal student aid will face new restrictions on their ability to withhold transcripts for unpaid balances. Let’s explore what this means for individuals with stranded credits and the implications if you have an outstanding balance.
Current Rules (Pre-7/1/2024) for College Transcript Withholding
Many colleges are using transcripts as leverage against students with unpaid balances. This means that even a small debt, such as a library fine, can result in a school withholding your transcript. Additionally, some schools have followed federal and state recommendations to withhold transcripts if a student has defaulted on a federal or state student loan.
When a transcript is withheld, it can create significant obstacles for students who wish to transfer to another institution, receive credit for completed coursework, or provide transcripts to potential employers. By withholding transcripts, a student's future opportunities are put at risk. The Ithaka S+R study has revealed that first-generation, minority, and low-income students are disproportionately affected by this practice, often finding themselves unable to access their academic records due to unpaid balances.
If a student has incurred federal student loan debt and cannot transfer to another school or provide necessary documentation to an employer, they may face difficulties in repaying student loans and managing other household expenses. And students who are unable to complete their programs or degrees are already a high-risk group for student loan default.
Changes to Rules for Withholding Transcripts, Effective July 1, 2024
The U.S. Department of Education has issued updated regulations for schools involved in federal student aid programs, effective July 1, 2024. These regulations limit the ability of schools to withhold transcripts. Specifically, schools must release transcripts for any term (or clock hours) in which a student received federal aid (grants, loans, or work-study) and has fully paid all charges to the school. Schools can still withhold transcripts for credits or clock hours that have an outstanding balance. In essence, while you may not receive your complete transcript, the school must at least provide the credits for which you received aid and have paid.
Why Did Transcript Withholding Become a Practice
You may be (or may not be) surprised to learn that this practice has been relatively common for several years. Holding a college transcript as collateral can be quite challenging for students trying to move on from an institution. If a student attempts to transfer to another school or enter the workforce and finds they cannot obtain their transcript, this situation can strongly motivate them to settle any outstanding charges with the school. With the changes to the rules, schools may need to find other ways to have student’s pay any outstanding balances.
Could My School Hold My Transcript in the Future?
If the school does not participate in federal student aid programs, they are not obligated to provide you with a policy that complies with these regulations. Should you have outstanding charges, and the non-participating school is withholding your transcript, you will need to follow their specific policy to gain access to it.
If your school does participate in federal student aid, they must adhere to the new regulation changes. If you previously requested a transcript and were denied, you can request it again in a few weeks once the new law is effective—July 1, 2024.
How to Manage Past Due Charges at a School?
If you have unpaid charges at a school, you will generally need to cover those costs out-of-pocket. Typically, federal student aid for an upcoming year cannot be used to settle past due charges. Similarly, most private student loan lenders restrict the use of their loans for outstanding balances.
If you find yourself unable to pay your outstanding school charges, it’s advisable to contact the institution immediately to discuss the best options for settling the debt. Many schools will offer repayment arrangements.