In 2020, Ithaka S+R estimated that approximately 6.6 million students did not have access to their educational transcripts due to past due balances, resulting in stranded credits. This challenge may impact any student, but our research indicated it was more likely to affect students who identified as women, racial and ethnic minorities, and those from low-income backgrounds. During our initial investigation of stranded credits, we found that nearly all higher education institutions used transcript holds as a tool to collect unpaid balances. While state policy changes have resulted in some shifts in favor of students gaining access to their earned credits, the vast majority of institutions continue to use transcript holds as leverage to collect debts. Soon, this practice will change.

In October 2023, the Department of Education published new rules related to financial responsibility, administrative capability, certification procedures, and ability to benefit. Within the hundreds of pages of documentation related to the final rules, the Department of Education included one that “require[s] an institution to provide an official transcript that includes all the credit or clock hours for payment periods in which a student received Title IV, HEA funds and for which all institutional charges were paid at the time the request is made.”

In simple terms, the new rule means that beginning July 1, 2024, institutions must grant a student their transcript for all terms in which they received federal financial aid and paid their bill in full. According to the National Center for Education Statistics, 55 percent of undergraduate students make use of federal student aid. While we do not know what the consequences may be for institutions who fail to comply with this rule, Federal Student Aid notes that failure to adhere to the Title IV Program Participation Agreement could result in administrative action.

What does this mean for colleges and universities?

The vast majority of institutions will need to review their policies and practices related to transcript withholding for past due balances and find a new path forward. They may look to peers across the country for inspiration; California was the first state to implement a transcript withholding ban in 2020, while Ohio recently prompted all public institutions to review and either affirm or reverse their transcript withholding policies, which led two-thirds of institutions to stop the practice of transcript withholding. As institutions consider how to comply, they will also need to navigate the technical limitations in place: student information systems weren’t built to easily issue partial transcripts based upon criteria that may change term-to-term—like receipt of Title IV funds. It is likely that many institutions will find the simplest path to compliance is to cease transcript withholding for all students with past due balances.

What does this mean for students?

Generally speaking, we expect students with stranded credits to gain access to their full transcripts. For many students, this may provide a path to credential completion by enabling them to transfer to another institution—an outcome and action previously limited by an inability to share their full academic record with institutions. While this is a positive outcome for students, it does not necessarily mean they will be able to return to their debt-holding institution, which is often their fastest and most efficient path to credential completion, if a registration hold remains in place. This rule also does not address the root problem that resulted in previously-stranded credits: institutional debt.

We anticipate some institutions will seek other ways to gain leverage over students with past due balances, like more aggressive collections efforts, stricter registration holds for students with past due balances, or implementing schedule drop policies for nonpayment by deadlines, a practice already in place at many institutions. As Martin Kurzweil and Liz Looker shared in a November op-ed for The Hill, the Department of Education rule change is a good start, but there is more work to be done to help adult learners with some college but no credential navigate their return to higher education and the accompanying financial and administrative hurdles that stand in their way.

When transcript holds are eliminated for students with past due balances, strategies can be implemented that consider the needs of all stakeholders. We have seen success in helping institutions collaborate to re-engage, re-enroll, and provide debt relief to students through programs like the Ohio College Comeback Compact, which successfully concluded its pilot year in 2022-2023 and transitioned to full implementation in 2023-2024. The Compact provided a pathway to debt relief and credential completion while also generating revenue that far outweighed the foregone collections institutions could expect to recoup from collections efforts. What was previously a lose-lose situation turned into a win-win in three ways:

  • Students were able to earn debt forgiveness through successful progression towards a credential
  • Institutions were able to generate new tuition revenue and see enrollment growth in their adult learners population
  • The Ohio economy, which requires more highly skilled workers to close the talent gap that exists and to meet its workforce needs, benefited from the results

The success of initiatives like the Ohio College Comeback Compact demonstrates the potential of solutions that benefit institutions, their students, and their workforce development needs. As higher education institutions grapple with how to comply with this new rule, they are also presented with an opportunity to reevaluate their policies, identify and implement innovative and student-centered practices, and consider how to re-engage adult learners with some college, but no credential. It remains to be seen how institutions will opt to comply with this new rule, but we are excited to share more about how we anticipate institutions will approach their decision making and key considerations they will take into account in a future blog post.