New Federal Rule Challenges Transcript Withholding by Colleges

Some six million students have “stranded credits” due to controversial practice

by Vins
Published: Updated:

A new federal regulation will make it more difficult for colleges to withhold students’ transcripts as a way of forcing them to repay loan debts, Sarah Butrymowicz and Meredith Kolodner reported for The Hechinger Report in December 2023. Transcript withholding is a strategy colleges use to recover outstanding debt, even though there are questions about the practice’s effectiveness and fairness. Their report focused on the case of Florina Caprita, a student who was unable to transfer credits earned in a paralegal training program after Ashworth College, a for-profit school, withheld her transcript.

At present, Department of Education (DOE) regulations prevent colleges from withholding transcripts for students receiving federal aid, but these protections do not apply to institutions that accept no federal student aid, including many for-profit colleges, such as Ashworth. Another agency, the Consumer Financial Protection Bureau, is also investigating transcript withholding, which the Bureau has deemed abusive because the practice is “designed to gain leverage over borrowers and coerce them into making payments.”

Many states have banned transcript withholding by public universities. In 2022, for example, Colorado did so, requiring state schools to provide records of students’ transcript requests. The difficulty lies in differences between state legislation and state and federal regulations: Currently, no single law or regulation bans transcript withholding across all colleges and universities.

A new DOE rule regulating transcript withholding will take effect in July 2024. As Katherine Knott reported for Inside Higher Education, the rule will “prevent a college or university from withholding a student’s transcript for terms in which a student received federal financial aid and paid off the balance for the term.”

Knott’s report noted that approximately six million students have what are called “stranded credits” because of transcript withholding. The new policy is part of a set of regulations intended to enhance the DOE’s oversight of institutions by providing it with additional tools to hold all colleges accountable, Knott reported.

As of mid-December 2023, there appears to have been no corporate news coverage of the new federal rules intended to regulate transcript withholding. In January 2023, the U.S. News & World Report published an article on students with stranded credits that provided some background on state and federal bans against transcript withholding. Otherwise, the serious impacts of transcript withholding on students have been ignored by the establishment press.

[Editor’s note: After publication of this story, Project Censored received email communication from a representative of Ashworth College, which stated: “We updated our transcript policy in January 2023 to allow for transcript access notwithstanding an outstanding balance owed, but due to the complexity of the change, our systems in some cases did not allow for access in accordance with the policy. We are in the process of accelerating the system’s change to better allow for seamless access for learners with balances owed.”]

Sources:

Sarah Butrymowicz and Meredith Kolodner, “Holding Transcripts Hostage May Get a Lot Harder, Thanks to New Federal Rules,” The Hechinger Report, December 1, 2023.

Katherine Knott, “U.S. Bans Most Withholding of Transcripts,” Inside Higher Education, October 25, 2023.

Student Researchers: Caroline Brussard, Dempsey Campbell, Samantha Druckenmiller, Grace Ferguson, and Ashley Santos (University Of Massachusetts Amherst)

Faculty Evaluators: Allison Butler and Jeewon Chon (University Of Massachusetts Amherst)