State-level Advocates and Lawmakers Set the Stage for National Policy
Monday, May 16, 2022 | WASHINGTON, D.C. — In light of New York state banning schools from withholding academic transcripts as a means of debt collection last week, the Student Borrower Protection Center (SBPC) released today maps showing a new analysis that 1-in-4 students across the country are protected by law from transcript withholding thanks to state action. Additionally, 1-in-4 degree-granting postsecondary institutions nationwide are banned from denying students access to their academic transcripts based on outstanding debt.
New York joins California, Colorado, Maine, Minnesota, and Washington in taking action against the predatory collection practice. Collectively, these states represent over twenty percent of students and institutions. On May 6, the Illinois General Assembly sent a similar bill to Governor JB Pritzker’s desk for signing. Once signed, a quarter of U.S. students have protections against withholding practices. This growing state-level momentum marks a shift in the national policy landscape for so-called “institutional” student debts—debts owed by a student directly to a school—and the success of advocates and lawmakers working to combat the increasing addition of these debts to the growing student debt crisis.
As these protections begin to reach a critical mass of students, SBPC urges all state and federal policymakers to implement similar measures while also addressing underlying institutional debts more directly.
“States have historically set the agenda in addressing the student debt crisis. We applaud leaders in New York and other states who are leading the way in framing the policy response to institutional debt,” said Mike Pierce, executive director at SBPC. “As more states prohibit transcript withholding as a debt collection tactic, they are also looking to the future and asking ‘how can we help students with the underlying debt itself?’ Now is the time for education and consumer advocates to come together to get this right.”
New York’s bill, S.5924-C/A.6938-B, was introduced by New York Senator Kevin Thomas and Assemblymember Harvey Epstein and signed into law by Governor Kathy Hochul on May 4, 2022. The bill prohibits schools from withholding transcripts from students who owe an institutional debt to their school.
“Transcript withholding caused me to miss out on applying for jobs and internships that were pertinent to my major and career goals,” reported Onyekachi Okeke, a senior at Hunter College in New York City. “Going through the hassle of begging the Bursar’s Office to temporarily release my transcript is not worth it… they will tell you the same thing: that I need to pay off the account balance. How can schools proclaim that the welfare of their students are top-priority when this punitive practice demonstrates the complete opposite?”
When institutions withhold transcripts to collect institutional debts, students—particularly low-income students—are unable to complete their degrees or obtain work in their field of study, both of which are often critical to their ability to repay the debt owed to their school. These debts can be for as little as $25, but one report found that the average amount owed across different institution types was $2,335.39.
“Higher education is still the gateway to economic mobility, and it was time to end the harmful practice of transcript withholding in New York State,” said Carolina Rodriguez, Director of the Education Debt Consumer Assistance Program, a program of the Community Service Society of New York. “Withholding a student’s transcript benefits no one and fails to recognize the challenges students face due to the current cost of higher education. I look forward to seeing the end of this practice nationally.”
According to SBPC’s new analysis of publicly available data on Fall 2021 enrollment and on institutions by state, prior to this year’s state action, only 1-in-7 students and 1-in-8 schools enjoyed transcript withholding protection of any kind. If bills that are still pending are enacted, each of these rates will increase from the now 1-in-4 students protected to nearly 1-in-3. Given that this analysis relies on data on recent enrollment, it does not reflect the tens of thousands of former students who now have access to their transcripts and is likely an underestimate.
“When working-class, Black, and brown students are too often forced to shoulder serious student debt just for the promise of a living wage, our institutions should support students’ career development, not penalize them for being unable to afford it yet,” said Sean Henry Miller, Northeast Regional Director of Young Invincibles. “Withholding transcripts is de facto gatekeeping and our students who have experienced it felt that gate slam right in their face.”
Institutional debts can occur over unpaid tuition or fines or fees and often arise when a student withdraws mid-term and becomes responsible directly to their school for financial aid funds that the school has to return to the federal government.
Another recent SBPC report found that institutional debts skyrocketed during COVID-19 as a wave of low-income students with federal aid withdrew from college early due to pandemic-related economic, health, and family reasons—and colleges responded by demanding students repay the amount of federal aid schools had to refund to the Department of Education.
“Low income students are disproportionately charged institutional debts, often without students even knowing let alone consenting. This often occurs when Pell Grants and federal loans are converted to institutional debts because a student temporarily withdraws mid semester to deal with a life crisis. Unlike federal student loans, these debts are not eligible for federal student loan relief. So institutional debts create insurmountable barriers that follow students for years preventing them from finishing a degree and appearing on credit reports far into the future,” said Charlie Eaton, coauthor of the “Creditor Colleges” report, an economic sociologist and assistant professor at UC Merced.
Policymakers must acknowledge schools’ growing role as creditors–as well as educators and debt collectors–when they enter into financial relationships with their students. This is how the Consumer Financial Protection Bureau, the federal consumer protection regulator, approaches institutional debts, which is in line with students’ lived experiences.
The SBPC has published several resources that policymakers can use to tackle the issues of transcript withholding and of institutional debt more generally. Those resources include:
- Model state legislation to prohibit transcript withholding, and a brief and academic paper outlining the practice’s harm to students
- A report by the SBPC: Withholding Dreams: Why Washington Must Tie COVID Relief for Colleges to Relief for Students Burdened by Institutional Debt
- A report by law and sociology professors: Creditor Colleges: Canceling Debts that Surged During COVID-19 for Low-Income Students
The SBPC welcomes the opportunity to partner with all stakeholders–including lawmakers, regulators, schools, students, and advocates–to develop solutions to end the burden of institutional debts and urges proactivity in response to impediments to students obtaining the best education and fiscal health possible.
About the Student Borrower Protection Center
The Student Borrower Protection Center is a nonprofit organization focused on alleviating the burden of student debt for millions of Americans. The SBPC engages in advocacy, policymaking, and litigation strategy to rein in industry abuses, protect borrowers’ rights, and advance economic opportunity for the next generation of students.