We all know the way we fund college in this country is a mess, and that our current student loan debt situation is unsustainable. As higher education costs continue to rise and the value of some degrees becomes questionable at best, there may come a time when it no longer makes sense to enroll your kids in a four-year college or university.
That said, there are other shenanigans going on in the world of higher education, including some that seem so awful they’re actually hard to believe. I’m talking about colleges that are actively withholding transcripts and degrees for students who don’t pay their student loans.
Yes, this actually happens. And yes, it’s pretty awful.
Many government appointees and agencies seem to agree. In fact, U.S. Department of Education Secretary Cardona issued an important call to end the practice of transcript withholding on YouTube at the end of last year. Meanwhile, the Consumer Financial Protection Bureau (CFPB) is “also examining the practice of transcript withholding as a debt collection practice,” according to their website.
While millions of students attend college in order to improve their job prospects and earn more money over the course of their careers, “many institutions of higher education are precluding students from making professional and educational gains by withholding their official transcripts to collect education-related debts,” they write.
The CFPB adds that “this practice might have the effect of prohibiting students from obtaining the jobs that would allow them to pay down their debts.” Further, “transcript withholding can have dire consequences for students trying to begin their careers or finish their education.”
Your School Is Withholding Your College Transcript: Now What?
According to higher education expert Michael Lux of The Student Loan Sherpa, students who are enduring this practice may have limited options or recourse depending on where they live.
He adds that the practice has been outlawed in some states including California, Colorado, Maine, Minnesota, New York, and Washington. Illinois was just added to the ranks as well thanks to a state law that passed earlier this year.
Those who live elsewhere may just be over a barrel. In fact, they may have to resolve their unpaid debts before they can access their transcripts to move on to the next stage of their lives.
Student loan expert Mark Kantrowitz, who has written extensively on this topic in the past, says that it’s completely legal for colleges and universities to withhold transcripts over student loan debt.
“The U.S. Department of Education even encouraged them to do so at one point,” he says.
That said, Kantrowitz says there is one thing a student could do to get a copy of their official transcripts, and that is to file for bankruptcy.
“Refusing to provide official transcripts during the pendency of a bankruptcy discharge petition involving debt owed to the college would be a violation of the automatic stay provision of the U.S. Bankruptcy Code,” he says.
Other Issues Schools Withhold Transcripts For
Unfortunately, this issue can impact anyone, even people who paid off their student loans or are currently on top of their required monthly payments.
Jay Zigmont, PhD, who works as a financial planner for Childfree Wealth, says that he experienced another scenario where a school was behaving poorly over an unresolved financial issue. Specifically, he says he was forced to resolve a parking ticket before the University of Connecticut would let him graduate with his Ph.D. in Adult Learning, and this was after he successfully defended his dissertation.
“It turns out that at some point, I got a ticket at the university, but I never saw it,” he says. “I had to go in and pay it before I could get my grades and graduate.
Zigmont also says the ticket had fees tacked on because he did not pay it within a certain time, but he just grumbled and paid it in order to put it behind him.
According to a 2021 article on this topic from The Hechinger Report, as many as 6.6 million students couldn’t obtain their transcripts from public and private colleges and universities for having unpaid bills as low as $25 or less last year.
In some cases, they write, these unpaid bills could be something like fees for room and board, parking fees, or library fines. In many cases, students don’t even know they are behind on these fees until they request their college transcripts and face a denial.
The Bottom Line
If you are a college graduate who is being left in limbo due to unpaid debts to your school, your best bet right now is likely figuring out a way to pay it off. This could mean forking over the cash to resolve small unpaid bills like parking tickets or library fees, but it could also mean getting back on track with payments toward your student loans. If you do what your school wants, no matter how unfair or how poorly timed their request is, you can get your transcripts and move on with your life.
Even so, Lux says he thinks it’s important to point out the absurdity of this practice since schools have numerous tools they can use to collect on unpaid student loans.
“They can hire debt collectors, report the failure to pay to credit bureaus, sue the borrower, and garnish wages,” he said.
Withholding official transcripts can also prevent borrowers from doing what the schools want, which is for them to pay back the money they owe. This is mainly due to the fact there are two primary circumstances where you need official transcripts — for a job or for transfer credits.
“In either scenario, the person requesting transfer credits is trying to enhance their earning power, either through getting a job or by getting further education,” says Lux.
By withholding transcripts, on the other hand, colleges are preventing their own graduates from entering the workforce.
“It is a policy that is both nonsensical and draconian,” he says.