When they want to pressure students to pay up for overdue fees and tuition, higher education institutions have long had an ace up their sleeves: the ability to withhold academic records and diplomas until the debt is paid.
Democratic Sen. Jeff Bridges argues that’s a bad idea, because those documents can be the keys to getting employed and out of debt.
“When you apply for those jobs, oftentimes they want proof (of your education). Too many institutions of higher education right now are holding transcripts for ransom,” he said.
Now, that’s set to change.
Last week, Governor Jared Polis signed a bill sponsored by Bridges and several Democratic colleagues that will ban the practice of transcript withholding to collect debts.
Karly Schwab, who testified at a hearing for HB22-1049, said her parents’ bankruptcy derailed her education at CU Boulder by leading to the discontinuation of her loans. She continued classes for a semester, but was forced to drop out owing $7,000 to the school. She then missed her chance to set up a repayment plan and was sent to collections, effectively doubling what she owed.
“I was young and I did not know what I was doing, like most 18-year-olds,” she said, explaining it took seven years to repay the debt, during which time she couldn’t re-enroll at the school, nor could she get a transcript to take her accumulated credits to another institution.
Schwab recently made her final payment. Once the university releases her transcript, she will be able to graduate with an associate’s degree in sociology from Front Range Community College, where she has been taking classes.
“The barriers put in place by the university made me feel like I’d be stuck forever. I grieve for the time that was wasted when I was younger and healthier,” said Schwab, who is now 27 and dealing with medical issues. She currently works part-time for New Era Colorado, a liberal political organization that lobbied in support of the bill.
The impact of the new law could be significant: In one recent year, state institutions reported that they collected about $242 million in student debt from people whose transcripts were withheld.
The bill was co-sponsored by Democratic Reps. Jennifer Bacon and Naquetta Ricks and Sen. Brittany Pettersen.
Schools concerned about loss of leverage
Representatives of colleges and universities argued that withholding documents is their primary leverage to collect debts from students. And they warned that in other states, institutions have responded to similar changes by raising tuition and changing how they distribute student aid.
“Where is the accountability?” said Jeremy DeLeon, an accounts receivable specialist at Colorado Christian University, noting that the school’s costs are always advertised upfront. And if students can take their credits without paying their debt, their next school “wouldn’t know the high risk and the past-due balance that that student has with other schools.”
The new law doesn’t prevent institutions from sending debts to collections, and they can still report unpaid debts to the credit bureaus. Some opponents warned that would happen more often if schools can no longer withhold transcripts, with potentially more costs and long-term damage to the credit scores of the people bill sponsors are trying to help.
Bridges said that the legislature could always tweak the new law if it doesn’t work out as intended. “If this bill results in a specific spike in young people, especially low-income young people, being put into collections, we will revisit this policy, “ he said.
Lawmakers did water down the policy a bit from its original form. The final law says that schools can withhold documents over debt for tuition, room and board fees or financial aid — unless the student can prove they need it for a job application, a transfer, an application for financial aid, joining the military or the “pursuit of other postsecondary opportunities.”
Republican lawmakers said that the bill undermines personal responsibility and threatens schools.
“Colleges are not blameless on the fact that their costs are running away faster than anyone else’s costs in society. But this adds more pressure, I think, to the costs that institutions bear going forward,” said Republican Sen. Paul Lundeen.
Sen. Barbara Kirkmeyer, a Republican, suggested an amendment that would require the former student agree to a payment plan before documents are released. Majority Democrats rejected that change.
“You’re responsible for your actions,” said Republican Sen. Larry Liston. A repayment plan allows students “to still get their transcript, and yet you are assigning an obligation to that institution of higher learning that, ‘yes I will pay back that debt.’”
Similar laws have passed in California, Washington and Louisiana, and U.S. Education Secretary Miguel Cardona has urged an end to document withholding at the federal level.
