The City University of New York prohibits transcript withholding for student debt. Will other institutions follow?

Last week, City University of New York (CUNY) administrators voted to stop withholding student transcripts as a debt collection tool. This decision follows the similar decision made by the State University of New York (SUNY) two weeks ago. Governor Hochul also said she wants to end the practice at all New York colleges and universities. This stems from laws passed in California, Washington, and Louisiana in the past two years that prohibit the retention of transcripts. With similar legislation pending in Minnesota and Ohio. Education Secretary Miguel Cardona also recently drew attention to the issue; these moves are long overdue. They could encourage other institutions and states to follow suit.

Transcript withholding is a long-standing practice that has been approved by the Department of Education (ED) that allows colleges and universities to withhold a student’s transcript as a tool to trick them into paying debts due to settlement, sometimes debts as small as twenty-five dollars. Institutions argue that withholding a transcript is one of the few tools they have to get students to repay funds owed to the institution. The reality is that withholding transcripts appears to be ineffective – even states where aggressive collection practices are allowed show only 7 cents on the dollar recovered as a result of transcript withholds. More importantly, suspending transcripts is likely to be counterproductive and have profound equity implications for the most marginalized and disadvantaged students.

(Verification is another rule that mainly affects already disadvantaged students)

Who is affected by the transcript hold?

Community college students are much more likely to be affected by transcript withholding than students attending four-year institutions. Given that community colleges enroll many more first-generation students and students of color, it’s also likely that the students most affected are much more likely to be from minority communities. These are the same students most likely to benefit from obtaining a post-secondary degree. Withholding transcripts prevents students from realizing the benefits of their education in multiple ways.

Students who cannot access their transcripts are usually unable to transfer credits to a new school to continue their studies. If they want to continue their studies, they often have to start over, leaving all previous credits locked in their previous institutions. Many jobs also require proof of post-secondary education which students cannot provide if they cannot access their transcripts. This reduces the economic mobility of these students and potentially makes it more difficult for them to repay debts owed to the institution that blocks their access to transcripts.

Transcript retention affects millions of students

Withholding of transcripts affects many people; the best available estimates show that 6.6 million students have credits they cannot claim. These are all people who might be able to re-enroll, complete their degrees, or get into better-paying jobs if fewer institutions withheld their transcripts. There is also innovative work underway that aims to support the need for institutions to recover lost revenue while ensuring that students are not prevented from completing their studies.

Federal regulations may prohibit retention of transcripts

If institutions are unwilling to waive the withholding of transcripts on their own, they may soon be forced to do so by federal regulations. Representatives of the Department of Education’s Institutional and Programmatic Eligibility Rules Development Committee have proposed a regulatory ban on the withholding of transcripts for all institutions that receive federal financial aid funds. The proposed rule is still only a proposal, but will likely receive strong support from students and student advocacy groups. Institutions and students would both be better served if institutions found more effective ways to collect outstanding debts rather than continuing to block students from accessing their academic records.