In the past 20 years, over thirty-six million Americans have left higher education without earning a postsecondary degree or credential. Those with some college experience but no degree are often left in debt without the requisite labor market opportunities to pay it off, and can struggle financially for several years after dropping out. These impacts are particularly deleterious for students of color, who are often saddled with an insurmountable financial burden after borrowing to pursue their education. All of these effects may be exacerbated by the current pandemic which has disproportionately impacted low-income students and students from traditionally underserved populations. 

One understudied challenge faced by students with some college and no degree is what we call “stranded credits”: academic credits they earned but cannot access due to an unpaid balance with a previously attended institution that is holding their transcript as collateral. While many institutions view a transcript hold as the most effective way to collect on any outstanding balances, the practice creates an obstacle for students who need the transcript to continue their education or obtain a job that will help them pay off that and other educational debt. 

For the past year, with generous support from both Lumina Foundation and the Joyce Foundation, we have been working to shed greater light on this important topic. Our new report, Solving Stranded Credits, provides the first systematic investigation  of the scope and impact of stranded credits. Our national estimates suggest there could be as much as $15 billion in unpaid balances to colleges and universities resulting in stranded credits, and roughly 6.6 million students barred from accessing their transcripts and completing their degrees. Adult learners, lower-income students, and racial and ethnic minority students are the most likely to owe outstanding balances to previously attended institutions, and therefore most likely to have stranded credits. Survey data suggest that the practice of withholding transcripts is widespread, with nearly 100 percent of institutions indicating that they withhold transcripts for one or more reasons. A majority of institutions withhold transcripts for balances as low as $25. 

As the economy continues to lag and enrollment across the higher education sector continues to stall, finding a pathway back to higher education for the millions of students with stranded credits will be critical for students, states, and institutions alike. The report surveys a variety of state and local efforts to mitigate the problem of stranded credits, including legislative bans on transcript withholding, debt forgiveness for returning students, and micro-loans. In the next phase of our work on this topic, we will be developing a set of novel potential solutions to the stranded credits challenge that build on, scale, and address the gaps in these existing solutions.