Stranded Credits: State-Level Actions and Opportunities

Over the past several years, state and federal regulators have increasingly scrutinized the practice of transcript withholding, or disallowing student access to transcripts or diplomas if they owe a past due balance to the institution. As of June 15, 2022, five states have pending bills and eight states have enacted bills that prohibit postsecondary institutions from withholding transcripts. Without transcript holds, students will be able to re-enroll in college, transfer to an institution that better fits their needs, apply for jobs that require postsecondary degrees, and potentially be in a better position to pay off their educational debt. However, while students in states with bans can access transcripts, the unresolved outstanding balances remain. This means that institutions likely will continue to pursue collections efforts that can harm students’ credit histories and overall financial wellbeing.

In contrast, four states have laws that require universities to withhold transcripts in certain scenarios. Some unique provisions of the states that allow transcript withholding include Tennessee’s permission to withhold transcripts for debts owed to smaller university entities such as bookstores, libraries, and food service centers, but not if the debt is under $100. Florida requires holds only for student loan borrowers whose debt goes into default.

Several enacted bills that prohibit transcript withholding also preclude institutions from charging transcript processing fees or delaying the receipt of a requested transcript if a student owes a past due balance. California, Colorado, Illinois, Maine, Minnesota, New York (Senate version and Assembly version), and Washington, all states that have passed transcript withholding bills, have nearly identical additions to their transcript withholding policies.

While the states that prohibit transcript withholding have some provisions that are very similar to each other, there are also additions that are unique to each individual state. For example, Ohio and Illinois prohibit transcript withholding only if a student has authorized that their transcript be sent to a current or potential employer. Minnesota’s transcript withholding policy does not allow institutions to withhold transcripts for debts owed under $250. Additionally, Maine’s law restricting transcript withholding allows 2-year institutions to withhold transcripts if a student owes a debt of $500 or more and a 4-year institution to withhold transcripts for debts of $2,500 or more. Washington prohibits transcript withholding for any debt only if the student requests an official transcript for job applications, to transfer to another institution, to apply for financial aid, or to pursue opportunities in the military or national guard.

Finally, five states have enacted legislative requirements to study transcript withholding. For example, the Virginia legislature is requiring that postsecondary institutions report data relating to student debt collection practices, current policies affecting a student’s ability to obtain a transcript, and the demographics of students with educational debt. Colorado, Maine, Minnesota, and Washington, all states with newly enacted laws prohibiting transcript withholding, will also require institutions to submit a report with data regarding transcript withholding. As postsecondary institutions begin to collect and share data about transcript withholding and student debt, we will hopefully have a better understanding of the amount of students and the demographics of students impacted by these policies.

A Novel Approach

While many states have considered policies that would allow, prohibit, or study transcript withholding, Ithaka S+R is supporting Ohio in a novel approach to addressing stranded credits. In northeast Ohio, students with past due debts have the opportunity to re-enroll in any of eight community colleges participating in the College Comeback Compact program. Through the compact, students have the opportunity not only to access their transcript, but to settle the underlying debt. Students will begin enrolling through the College Comeback Compact program in the fall of 2022.

Ithaka S+R will be seeking additional partners to scale compact programs like Ohio in 2022 and 2023. If your system or state is interested in being part of this work, please reach out to Sarah Pingel (Sarah.Pingel@ithaka.org).

Enacted State Transcript Withholding Policies as of June 15, 2022