The ‘Human Cost’ of Stranded Credits

Withholding course credits from students because of outstanding balances on unpaid fees and tuition owed to their colleges has long-lasting negative effects, especially on low-income students and students of color, according to a new qualitative study from Ithaka S+R, a higher education consulting firm.

Authors of the study on so-called stranded credits argue that withheld transcripts are a racial and socioeconomic equity problem that delays or prevents students from graduating and is an obstacle to career opportunities that would help them earn enough money to pay down their institutional debts.

The study is based on interviews with 11 students of color and two transfer counselors from five higher education institutions about their experiences with and thoughts on stranded credits. The study also highlights student narratives shared on social media.

“The students that have been the most disenfranchised by the educational system and the lingering effects of segregation are the ones paying the cost for this policy,” said Sosanya Jones, lead author of the study and an associate professor of educational leadership and policy studies at Howard University in Washington, D.C.

Her study follows an Ithaka S+R report from last year, which estimated that students nationwide owe colleges and universities up to $15 billion in unpaid fees and tuition, and about 6.6 million students may be weighed down by stranded credits. Meanwhile, a survey of 295 institutions by the American Association of Collegiate Registrars and Admissions Officers found that 95 percent of them withheld transcripts for one reason or another.

The issue of stranded credits is getting increased national attention as colleges and universities, especially community colleges and minority-serving institutions, use federal coronavirus relief funds to pay off institutional debts owed by students. More than 20 historically Black colleges and universities have cleared students’ outstanding balances in recent months.

The clearing of debts has been a widely applauded response to the financial challenges and job loss many students faced during the pandemic. But some observers have pointed out that the colleges are reimbursing themselves for payments they likely wouldn’t receive if not for the federal funds. Others have noted that the one-time payoffs do little to fix the broader federal student loan debt crisis, which disproportionately burdens Black borrowers. Still, there’s no denying that even a one-time debt relief can have a huge effect on the lives of the students weighed down by balances owed and held back by stranded credits.

“You really don’t get the weight of the human cost until you talk to the students that are impacted,” Jones said. “The advantage of this study is it actually gives you their lived experience of being knocked off the track or even shut out of higher education for a long period of time and how it affects their lives.”

Jones said she felt it was important to bring students’ personal stories about stranded credits into the national discussion.

The report is chock-full of anonymous student narratives, both from interviews and social media, detailing the lingering effects of stranded credits: students having to stop out temporarily, retake classes elsewhere, change majors and miss promotion opportunities at their jobs because they didn’t earn their academic credentials or degrees.

One student -- identified by only her first name, Amy -- said she left college in 1988 because working two part-time jobs and enrolling in a full course load was “just too much.” When she re-enrolled, the financial aid office called her about two weeks before classes to tell her she had to pay an outstanding balance before resuming her studies.

“I didn’t have that money, I couldn’t do it,” she said. “For a student on the lower end of the economic ladder, it puts you in a box. Like, you can’t enroll in the new university, the old university won’t let you go because you owe them money. You can’t get the information that you need in order to go anywhere.”

Many students described struggling with institutional bureaucracy, particularly with the registrar’s and financial aid offices of their colleges. Most of the students interviewed had started college for the first time more than five years ago, which surprised Jones. She said the length of time reflects how much stranded credits can slow completion of college.

The delay can also become a long-standing barrier to students becoming well-paid professionals, lessening the earnings they could have made over time and contributing to a stubborn racial wealth gap.

Jones said an important narrative missing from the study, and many studies on higher education, is the stories of the students who never made it back to college.

One of the “critiques” of higher ed research is “we only talk to the people who are participating in higher education,” she said. “Stranded credits is really something that shuts people out of higher education … Some of the people, or maybe most of the people, this has occurred to are practically invisible because they no longer participate in higher ed.”

Some institutions are trying to address the problem of stranded credits in light of the pandemic. The City University of New York system, for example, recently released the transcripts of students and graduates with unpaid tuition and fees. It also lifted financial holds on 74,000 student accounts because of outstanding balances during the pandemic. The one-time action applies to students who were enrolled in the system between March 13, 2020, the day COVID-19 was declared a national public health emergency, and spring 2021.

“Releasing student transcripts and eliminating financial holds, regardless of a person’s financial status, is the most pragmatic and compassionate way forward in this challenging climate,” CUNY chancellor Félix V. Matos Rodríguez said in a news release.

Trinity Washington University, a private Hispanic-serving and predominantly Black institution in Washington, D.C., has a policy of withholding credits and prohibiting students from re-enrolling if they owe $4,000 or more to the institution. The university waived the policy for the 2020-2021 academic year and for the upcoming fall semester to ease students’ financial burdens during the pandemic. It also used COVID-19 relief funds to cover $2.3 million in unpaid balances for 535 undergraduates.

Pat McGuire, Trinity’s president, said the university was already reconsidering stranded credits after an analysis of the policy several years ago showed the university typically lost about 200 to 300 students per year because of debts to the institution. She plans to come up with alternatives to the policy going forward. She noted that the median household income of Trinity students is $25,000 per year. These students “truly don’t have the money,” she said.

“The problem we have, which any president will tell you, is while the enrollment side says, ‘Let’s stop enforcing the policy,’ the financial side says, ‘Over my dead body,’” she said. But “the idea that it compels the student to pay is a false hope. What it does is make the student angry and upset, it causes them to leave school, it means they can’t get the job that would help them to be economically capable. It just doesn’t work that way for low-income students.”

One long-term alternative explored by other universities is debt forgiveness over time. Wayne State University in Detroit started a program called Warrior Way Back in 2018 for students with outstanding balances who want to return after two or more years away from the institution. The university forgives up to $1,500 over three semesters or upon graduation for qualifying students. Eligible students must have a balance of $1,500 or less and at least a 2.0 GPA.

“Student debt was becoming an issue that institutions needed to start thinking about and dealing with,” said Ahmad Ezzedine, associate vice president for educational outreach and international programs at Wayne State. “As we started looking at the data, we identified a large number of students at Wayne -- many had close to 100 credits but never finished.”

In the last few years, state lawmakers across the country have also moved to curtail the practice of withholding transcripts. California became to first state to ban holding transcripts as a debt-collection strategy in 2019. Washington State and Louisiana followed in 2020. Similar bills have been proposed in Massachusetts, Minnesota, New York and Ohio.

Jones is hopeful the movement will grow, given the “converging” of the pandemic and a national focus on racial justice spurred by the killing of George Floyd last summer.

“I think it was great timing in terms of getting this out there and maybe starting to really whittle away at this practice,” she said.

These efforts haven’t been without opposition. Some college and university leaders argue transcript holds are a necessary tool for recovering funds needed to sustain institutions.

Parents “know that sometimes you can do a lot to try to get someone to behave in a particular way, but it’s not until you have the big stick that you can bring somebody to a table,” Terri Standish-Kuon, president of the Independent Colleges of Washington, said in testimony opposing the Washington State bill before the Washington House of Representatives college and workforce development committee.

McGuire believes colleges and universities will abandon policies that result in stranded credits “involuntarily” as lawmakers turn their attention to the issue. She hopes federal policy makers will increase the Pell Grant so low-income students end up with less outstanding tuition and fees in the first place and so underresourced institutions are less reliant on recovering those missing funds from students.

The Ithaka S+R report offers a series of policy recommendations. It suggests state lawmakers craft legislation that discourages or prevents institutions from holding transcripts and encourages more flexible options such as debt relief programs and payment plans. It also notes that those efforts could be bolstered by “supporting capacity building” for underresourced institutions.

Jones noted that students in the study expressed a desire to repay their debts to institutions despite feeling that holding their credits hostage was wrong.

“They’re not trying to necessarily shirk responsibility,” she said. “They want more options, they want more flexibility, they want more empathy.”