Institutions of higher education have traditionally used sanctions such as preventing future class registrations and withholding academic transcripts when students owe delinquent account balances. Depending on the schools’ policies, or sometimes state law or regulations, such sanctions may be triggered for any amount due or at a higher dollar threshold that is formula-driven or set arbitrarily.

Short of referring these debts to an outside collection agency or other entity to recover outstanding balances, these holds have provided colleges and universities with a low-cost and easy-to-implement remedy to force students to pay in full or reach out for assistance.

However, recent coverage in the media (for instance, Hechinger Report and Inside Higher Ed) focusing on the large number of students whose financial problems have forced them to delay completion of their educations has raised attention to use of these types of sanctions. A 2020 study by Ithaka S+R on impacted students with “stranded credits” portrayed a scenario where financially-challenged students had little, if any, opportunity to receive their degrees. They could not continue their educations or transfer credits because of outstanding student debt which, in some cases, amounted to only a few dollars.

The issues raised by transcript withholding led the California legislature to enact a law in 2020 prohibiting all institutions from blocking transcript requests because of outstanding balances owed. Washington and Louisiana have since enacted comparable legislation and a number of other states are considering doing so. At the same time a bill was proposed recently in New York, both the State University of New York (SUNY) and City University of New York (CUNY) systems stopped sanctions using transcripts.

In addition to complaints from current and former students, schools now may be subject to complying with new laws and regulations governing their internal operations. So, what should colleges and universities be doing today to mitigate the impact?

Some ideas to consider include:

• Review existing policies and procedures governing use of holds and restricting student services. Are you restricting transcripts or registration for any amount or reason (i.e., tuition vs. parking or library fines) that money is owed? Consider your current dollar threshold for service restrictions and determine how, or if, it has been reviewed or changed in recent years (besides pandemic management).
•  Involve your institution’s attorney in the review process. Having counsel look at or help create an appeal process that is consistently managed can ensure a transparent and fair practice. Creating differing rules or interpretations for every student situation not only can lead to criticism, but could create the perception of a UDAAP, which refers to unfair, deceptive, or abusive acts or practices by those offering financial services (including higher education), which is illegal under the Dodd-Frank Act of 2010.
•  Weigh whether your state or district has implemented or is considering legislation or new rules. Work with your government affairs office or lobbyist to take the temperature on how institutional restrictions are viewed by legislators and regulators. Educate officials on what the impact of eliminating holds might be on the institution.
•  Investigate opportunities to create and use debt reduction or forgiveness programs. Resolving small balance debts can be a “win-win,” eliminating minor amounts owed, while creating a positive experience for a student whose continued attendance results in additional revenues earned. Student success stories not only can breed positive press for an institution, but may even result in additional enrollments and donations.

 At a time when colleges and universities are questioned as to whether they are sufficiently accessible or affordable, using service restrictions that block students from continuing or using their educations will remain under close scrutiny. How a school deals with this issue will not only impact collections but could also influence future revenue streams and enrollments.