Navigating the Evolving Landscape of Transcript Withholding Policies in Education

The U.S. Department of Education (ED) has recently implemented significant regulatory reforms aimed at enhancing accountability among educational institutions and bolstering safeguards for students and taxpayers. These changes, which include revisions to transcript withholding policies, seek to address issues such as heavy student debt loads and sudden institutional closures. The new rules, which went into effect on July 1, 2024, have sparked discussions among colleges, advocacy groups, and students alike.

The Core Issue: Transcript Holds and Unpaid Balances

Colleges often place holds on the release of academic transcripts, grade reports, and diplomas when students fail to meet their financial and administrative obligations. These obligations can range from unpaid tuition and fees to defaulted education loans, unpaid fines (such as parking tickets or library fees), and failure to complete exit counseling. Many institutions withhold transcripts to compel students to settle outstanding balances. However, without access to their transcripts, students may face significant obstacles in continuing their education or securing employment.

New Federal Regulations: A Shift in Policy

The Department of Education has introduced regulations that place new conditions on the Title IV program participation agreements between higher education institutions and the government. A key provision mandates that colleges cannot withhold academic transcripts for course credits paid for with federal financial aid. This means that institutions are now prevented from withholding a student’s transcript for any term in which the student received federal financial aid and successfully cleared their financial balance for that term. These regulations, specifically C.F.R. 668.14(b)(33) and 668.14(b)(34), aim to prevent institutions from withholding official transcripts or taking any other negative action against a student related to a balance owed by the student that resulted from an error in the institution’s administration of the title IV, HEA programs, or any fraud or misconduct by the institution or its personnel and require an institution to provide an official transcript that includes all the credit or clock hours for payment periods in which 1) the student received title IV, HEA funds; and (2) all institutional charges were paid, or included in an agreement to pay, at the time the request is made.

Under these regulations, colleges must release transcripts for all enrollment periods in which the student received federal financial aid and paid their bill to the school in full. The only credits a college or university can withhold are those completed in a semester where the student still owes money. For example, if a student has completed 50 credits of classes and then withdrew while owing a balance of $500 for a semester where they completed six credits, the school will have to release the student's transcript with the 44 credits they completed and paid for while receiving federal financial aid.

James Kvaal, Education Under Secretary, stated that this change will ensure that students receive credit for the education that they have completed and help them with transfer and finding a job.

Read also: The CPB Logo: A Visual History

Understanding the Rationale Behind the Change

The new regulations are rooted in concerns about equity and access to education. Research from Ithaka S+R indicates that approximately six million students have "stranded credits" due to transcript withholding. These students are often unable to continue their education or advance their careers because they cannot access their academic records.

Many of the debts that lead to dropouts and blocked transcripts are for a few hundred dollars or less. Often, these holds prevent students from accessing higher paying jobs or completing their degrees-ironically, both solutions that would make them better able to pay off their debt to their school.

Martin Kurzweil, vice president of educational transformation at Ithaka S+R, views the new rule as a significant step forward and essentially a national ban on transcript withholding for credits paid with federal financial aid.

Concerns and Considerations for Institutions

While the new regulations are intended to benefit students, some colleges have raised concerns about their potential impact. Institutions may worry that limiting their ability to use transcript holds will necessitate more aggressive collection efforts to recover outstanding debts. Emmanual Guillory, senior director of government relations at the American Council on Education, expressed caution about how the new language will be implemented and what this really means for institutions.

However, there is also growing evidence that colleges and universities have better options than barring students from accessing their transcripts. Programs like the Wayne State Warrior Way Back program and the Ohio College Comeback Compact have shown that colleges can do more to bring students back to higher education if they put in the effort. These programs have included forgiving institutional debts if the student re-enrolls at the school, or, in the case of the Ohio compact, any participating school. Evidence from these programs shows that bringing students back to college is good for the students who can complete their studies and brings in more revenue for the schools than they lose by forgiving the debts.

The Role of FERPA

The Family Education Rights and Privacy Act (FERPA) [20 USC 1232g and 34 CFR 99] grants students the right to inspect and review their own education records. 34 CFR 99.10 (d)(1) requires the college to provide the student with a copy of the education records if circumstances prevent the student from inspecting and reviewing the records in person. While FERPA requires colleges to provide students with access to their education records, including academic transcripts, it does not necessarily mandate the release of official transcripts. Colleges can comply with FERPA by providing unofficial copies of transcripts. If the student has defaulted on his or her financial obligations, the college may also specify this on the academic transcript.

Implications of Bankruptcy

Filing for bankruptcy can have significant implications for transcript withholding. Under the bankruptcy code, colleges may not withhold an official transcript after the filing of a bankruptcy petition or after the discharge of education debts under either Chapter 7 or Chapter 13. This stems from three provisions of the bankruptcy code:

Automatic Stay: 11 USC 362(a)(6) prohibits “any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case” upon filing of a bankruptcy petition.
Anti-Discrimination: 11 USC 525 prohibits governmental units from discriminating against a debtor with a bankruptcy petition or who has had a debt discharged by bankruptcy.
Discharge Injunction: 11 USC 524(a)(2) provides that a discharge “operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor, whether or not discharge of such debt is waived”.

Read also: Navigating Florida Teacher Certification

Partial Transcript Holds: A Potential Compromise?

The regulatory changes have led some institutions to consider implementing partial-transcript holds as a way to comply with the new requirements while still addressing unpaid balances. This approach involves releasing transcripts for payment periods in which the student received Title IV, HEA funds and all institutional charges were paid or included in an agreement to pay.

State-Level Actions

Ithaka’s research, and work from the Student Borrower Protection Center helped push 11 states, (New York, California, Colorado, Maine, Minnesota, Washington, Ohio, Illinois, Indiana, Connecticut, and Oregon) to ban the practice over the past two years.

The Broader Context: Financial Responsibility and Institutional Oversight

The new transcript withholding regulations are part of a broader effort by the Department of Education to enhance oversight of institutions and protect students and taxpayers. The department is particularly concerned about sudden college closures and the negative impact those have on students who can’t complete their academic program elsewhere, as well as on taxpayers who foot the bill for student loan discharges.

Under the new rules, colleges that are put on probation by their accreditor or that experience significant fluctuations in federal student aid volume could have to provide financial protection such as cash or a letter of credit to the government.

Ensuring Transparency and Clarity

The regulations require institutions to provide adequate career services along with more information on financial aid offers to students, including details of the actual cost of the education being provided.

tags: #department #of #education #transcript #withholding #policy