State of Play: Approaches to Transcript Withholding Policies

By Hugh T. Ferguson, NASFAA Senior Staff Reporter

As institutions look to reduce obstacles that prevent students from completing their programs, one issue that has stalled at the federal level is making some progress at the state level: banning the practice of transcript withholding for students with unpaid institutional balances.

While states have been taking action in recent months to pass and implement new laws, the Department of Education (ED) has indicated a need for more serious federal evaluation of the issue.

When New York in May enacted a statewide ban on transcript withholding policies, ED Under Secretary James Kvaal praised the state’s effort to enforce policies that assist low-income students.

New York joins a handful of other states to enact such laws in recent months — including California, Colorado, and Washington — and ED has also begun to express more keen interest in the policy.

As a part of the Institutional and Programmatic Eligibility Committee work, conducted during ED’s negotiated rulemaking earlier this year, there was a concerted effort to get the department to explicitly address the issue of transcript withholdings.

While the committee did discuss a narrow limit on the practice as it related to regulatory language in the Certification Procedures issue paper, members did not reach consensus.

NASFAA's "Off The Cuff" podcast recently highlighted issues with transcript withholding

Marvin Smith FAAC®, executive director at UCLA’s office of financial aid & scholarships, represented four-year public institutions during the most recent negotiated rulemaking session, and said the committee struggled to find time to thoroughly discuss all of the issues at hand.

When the negotiated rulemaking session began, regulatory language concerning the practice of transcript withholdings was not a part of the agenda, so some committee members looked to have ED weigh in on the issue and amend the agenda.

Citing time constraints and potential limits in their authority, ED did not agree to have the additional topic placed as a stand-alone item for further discussion but did consider it as part of the discussion on the Certification Procedures issue paper.

“We didn't have time to, in my mind, address these issues, and I didn't think that the department wanted to,” Smith said, stressing that the negotiations as outlined were already at risk of being rushed due to the number of topics and the complexity of the policies at hand.

That’s not to say that transcript withholding policies are not important to address at the federal level. Smith said there needs to be more discussion on the issue because a sudden unilateral ban could lead to unintended consequences since schools would have to assess alternative collection practices.

One concern, that could have taken a significant chunk of the committee’s finite time, would be that schools, in response to a ban on the practice, would then rely on collection agencies to collect student debt. Smith said this sort of response would not be in student’s best interest and that ED would need to come up with ways to ensure that students were not left worse off by sudden changes in administrative policies.

As a means of preventing such a severe response, the American Association of Collegiate Registrars and Admissions Officers (AACRAO) and National Association of College and University Business Officers (NACUBO), created a detailed framework with which schools should approach the development of their policies and stressed that administrative-process holds should not be used in the case of  “trivial or minor debt” compared to what the student has already paid to the institution.

Within this framework the usage of transcript withholding policies or “administrative-process holds,” are designed to motivate a student to complete a task, such as paying a bill, turning in missing documents or meeting other administrative requirements and not to be punitive.

Many different circumstances may lead a student to owe a balance to their school, and they may not always be within the student’s control. For instance, when students who rely on federal student aid withdraw during an academic term, they may end up with a balance due as a result of the return to Title IV funds (R2T2) calculation.

Ernest Ezeugo, policy director at Young Invincibles, also participated in the rulemaking process as a negotiator on behalf of students and student loan borrowers, and encouraged ED to look into its available authority in regulating transcript withholding practices.

Throughout the discussions, Ezeugo said he wanted there to be more seats designated for student voices but was overall heartened by ED’s consideration of the issue and their effort to include language in the proposed revision to the Certification Procedures issue paper.

“It certainly, I think, was a good effort by the department to really think about this problem,” Ezeugo said. “It certainly signals that the Department of Education understands that the practice itself needs some looking and they need some clarity around it.”

While it remains to be seen whether the federal government will take action in this arena, postsecondary institutions have taken their own steps to adjust the practice in ways that are more student-centered and allow for flexibility.

Jacqueline Kennedy-Fletcher, assistant vice provost and executive director of student financial assistance at Indiana University’s Office of Enrollment Management, recognizes the paradox that transcript withholding policies can impose on students.

“You want to have some type of instrument to force the student to pay you by not releasing their transcript,” Kennedy-Fletcher said. “But at the same time, by not releasing that you're inhibiting them from moving forward to finish their education.”

The issue has prompted Indiana University to evaluate its own practices and develop flexibilities to more delicately handle the issue, by creating a $5,000 institutional debt threshold below which students would not be subject to penalties such as registration holds.

“We do run a report of any student who has a balance of $5,000 or higher, that's preventing them from enrolling in school and we will look to see if they utilize all their aid options,” Kennedy-Fletcher said, adding that the office will then reach out to students and look for ways that they can go about helping them get below that threshold.

One restriction on this institutional debt policy threshold is that while balances allow students to stay enrolled, and graduate, they cannot use their transcripts to transfer if they still hold institutional debt. If a student graduates with institutional debt they will not be able to receive their diploma or transcripts until the balance is paid in full, but exceptions can be made for students who need the documentation in order to comply with a job offer.

Ezeugo said that most students starting out their higher education careers are not aware of these potential barriers to earning their degree and that it can be difficult to underscore the potential dangers while emphasizing the importance of staying enrolled to also maintain access to valuable resources meant to reduce housing and food insecurity.

In the meantime, federal pandemic aid has served as a useful resource for schools looking to reduce institutional debts. The Higher Education Emergency Relief Fund (HEERF) provided by the American Rescue Plan has enabled schools to cover students’ institutional debt, thus reducing the number of students who might be at risk of having a transcript withheld.

The use of funding has been a welcome move for student advocates.

“I think certainly institutions have levied pandemic aid in good ways,” Ezeugo said. “But knowing that those funds are temporary, I would hope the benefits of that are not temporary as well.”


Publication Date: 6/6/2022

David S | 6/6/2022 2:48:12 PM

This is a no-win for colleges. This is not the type of issue that ED has typically involved itself in, and now that states have started legislating it, they appear more interested. If we oppose it, everybody is already lined up to criticize us...see Governor Hochul's use of words like unfair and predatory.

Truth is that some transcript holds (and I can't help but wonder if registration holds are next) are not for trivial amounts of money, and they're not all placed on low income students. I've seen student accounts with 5-figure balances owed (with a number that doesn't start with a 1), and for students who weren't even financial aid applicants.

ED won't allow someone to receive any T4 aid and send them into an onerous collections experience if they default - no matter how low their loan balance is - and many states (to whom the money isn't even owed) strip those same loan defaulters of professional licensure, etc., making it harder for them to establish the career they aspired to by going to college in the first place. But somehow colleges withholding a transcript crosses the line.

Darren C | 6/6/2022 1:51:46 PM

So instead of addressing the actual issue of why so many students are not completing their education and leaving school while they have debts, the answer is, you cannot be held responsible for your debt if it means withholding your transcript? Another band aid to a much larger problem that no one seems to want to address. We're seeing a pattern here, like the potential for some form of loan forgiveness across the board. It will solve nothing, most likely create more problems long term, but it feels good in the moment. Until accountability is addressed on all sides, mainly to the federal Government that has greatly helped create this mess, then no actual long term, positive change will occur.

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