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For most students, going to college means going into debt. As postsecondary education becomes more crucial than ever to middle-class opportunity, the majority of undergraduates have to borrow against their future in order to secure it. For those who do, the median burden is $17,000, but even smaller debt loads are unsustainable for many students.

The affordability crisis has spurred initiatives for change: calls for tuition-free college, experiments with low-cost degrees, promise campaigns that guarantee aid to local college-goers. Meanwhile, student loan obligations have ballooned to more than $1.4 trillion -- a total that exceeds even Americans’ credit card debt.

All this is well-known. What is less recognized is a second debt crisis, smaller in financial scale, but perhaps even more punitive in its effect on students. This other crisis doesn’t concern the loans that college graduates owe bankers and the government. It concerns the money that college stop-outs owe the institutions from which they have failed to graduate: back tuition, housing bills, library and lab fees, and other unpaid balances that block them from either graduating or re-enrolling. Let’s call it the institutional debt crisis.

I realize what you may be thinking: surely unpaid bills are a sideshow to the real financial challenges facing students and their families. Surely they’re a matter of student fecklessness or irresponsibility, not a problem for op-eds and policy proposals.

But hear me out. The evidence suggests that the institutional debt crisis is a pervasive barrier to student success and a roadblock to current efforts to boost college attainment in the U.S. It’s a toxic by-product of two factors: the precariousness of many students’ lives and the tunnel vision of much administrative practice. I believe that it can be largely solved.

I began to see the scale of this problem as dean of an adult bachelor’s program at the New School in New York during the Great Recession. It was shocking to discover that one in four of our students had bursar’s holds due to unpaid bills -- bills that were often no larger than one or two credit hours. Administrators at other institutions were also reporting high levels of delinquencies. I chalked it up to hard times.

But the economic recovery did nothing to lower the numbers. According to surveys by the National Association of College and University Business Officers, more than 30 percent of U.S. college students failed to settle their balances each year from 2013 to 2016. As at the New School, the shortfalls were relatively modest, averaging 3.8 percent of the total amounts that students were invoiced. There are exceptions, of course, individuals who accumulate sizable obligations. But from year to year, a strikingly large number of college students are on the hook for a comparatively small fraction of their bill.

Many delinquencies stem from disorganization, carelessness or short-term cash-flow issues; many are settled quickly without harm to the college’s bottom line or the student’s record. But for a significant number of students, the term-to-term struggle to balance tuition, wages, rent, food, health care and child care makes even small debts unmanageable, and they leave school.

How many? It is hard to know for sure. The balances are owed to hundreds of institutions, and they’re loath to share financial data in public. But research at Georgia State University -- which has pioneered efforts to understand and solve the problem -- found that 15,000 students annually (some 30 percent of the student body) owed unpaid balances. Each semester, about 1,000 were required to withdraw, having run afoul of state-mandated rules for repayment.

And Georgia State is no outlier. The educational research and consulting firm EAB estimates that institutional debt leads colleges and universities to “purge” between 2 and 4 percent of their student body every academic term. Many other students stop out on their own, either formally withdrawing or simply ceasing to attend class. It’s reasonable to assume that at least one million students every year -- 5 percent of all U.S. undergraduates -- are forced to leave school because of tuition and fees they owe.

What Campuses Might Do

I use the word “forced” advisedly. This debt crisis isn’t only the result of financial insecurity or financial illiteracy on the part of students. It’s also driven by punitive policies and practices on the part of higher education. I don’t mean that all institutions immediately purge all students who are in arrears. Colleges and universities variously set the thresholds (generally between $200 and $500) and deadlines (generally the middle of the term after the unpaid balance was incurred) that can trigger a bursar’s hold.

But once the hold is triggered, it is standard practice nearly everywhere -- sometimes mandated by state regulations -- to freeze a student’s status and progress. They cannot enroll in new courses, graduate from their home institution, transfer credits to a new institution, get official copies of their transcript or access a Pell Grant or other public aid for which they may be eligible. This is true no matter the size of the balance or the state of the student's academic record. A debt of $500 can lock up dozens of credits that were earned and paid for in previous semesters.

It’s easy to understand the rationale for this approach. Once an unpaid balance triggers an administrative response, it is assumed, the institution needs to address the student as the opposing party in a contractual conflict. "Using holds on registrations, transcripts and other privileges," NACUBO’s vice president of regulatory affairs has argued, "is the only collateral that the school has over a student who owes them money."

Moreover, administrators fear, letting delinquent students off the hook runs the risk of what economists call “moral hazard,” rewarding some for slacking on obligations they can actually meet and incentivizing others to game the system.

These are real issues. It can be hard to distinguish students in financial distress from late payers who need financial counseling or simply a crisp communication. Some do game the system. And outside elite institutions, most administrators live under chronic fiscal stress. A revenue shortfall of even 3 or 4 percent can cut to the bone. As a former dean at a tuition-dependent university, I know how readily one can fall in line with these default practices.

But the punitive policy is self-defeating. Far from strengthening repayment and retention, it erodes students’ capacity to persist, to graduate, to transfer or to re-enroll -- and to repay what they owe. Most of those who stop out must soon add loan payments to the stressors that led to their unpaid balances in the first place. About one in six late payers have their accounts referred to collection agencies, which typically add fees of up to 30 percent.

A bursar’s hold, in short, is less likely to serve as the opening of a negotiation than as the closing of a door. It blocks the student’s access to past and future credits and the college’s access to revenues. “Strictly enforcing unpaid balances,” conclude the researchers at EAB, “is a lose-lose proposition for institutions and students.”

Beneath these impacts on revenues and retention lies a more basic problem. The punitive policy misrecognizes students, leading institutions to ignore much of what they know or could easily discover about those who owe money. Four-fifths stop out in good academic standing. Most have completed and paid for credits in previous semesters. And what they owe averages 10 to 20 percent of their unsettled bill.

With few exceptions, these are not deadbeats stiffing the system, like diners who leave a restaurant without paying. They are students in trouble, unable to manage the ongoing costs of an education to which most have already shown their academic and financial commitment.

The ramifications of this mixture of debt and punishment go beyond the delinquent student and the individual institution. They are national in scope. Students who quit school with unpaid bills join the huge population of working-age adults whom demographers label “some college, no degree.” Federal data put their number at 36 million, about 22 percent of Americans aged 25 to 64.

According to the National Student Clearinghouse, two-thirds of them stop out with at least a year of enrollment, and of these multiple-term enrollees, about two-thirds are under 40. They leave school for many reasons: difficulty mastering the academic or navigational skills needed for college, the time and role pressures of family and work, the sheer unaffordability of next term’s tuition. And sometimes unpaid balances.

It is hard to know how many of those with some college, no degree stopped out with -- or because of -- institutional debt. Our data at the Graduate! Network (a network of regional initiatives supporting adults returning to college) suggests that it is nearly one-third of the “comebackers” we work with. This is a tiny sample, of course. But putting it alongside the national demographic data about stop-outs and the annual surveys of student “purges,” I would hazard that as many as six to eight million nongraduates are in debt to their past institutions. (By way of comparison, an estimated 8.8 million Americans are in arrears on their student loans.)

Which puts them at the heart of the completion agenda, the push by policy makers to boost languishing graduation rates. Advocates like the Lumina Foundation and Complete College America have stressed the importance of adult comebackers to this effort. Lumina’s influential Goal 2025 -- a plan to increase the share of working-age Americans with postsecondary credentials to 60 percent by 2025 -- calls for bringing six million of them back to school.

Those who quit with unpaid balances represent both a massive opportunity and a massive barrier for this goal. They are among the most eager and ready to resume their studies, as our work at the Graduate! Network attests. But they are also hobbled by standing debts, embargoed credits and disconnection from their past institutions.

It is in everybody’s interest, then -- colleges, policy makers and, most of all, students -- to resolve this issue. Doing so requires a new paradigm for handling institutional debt. Some experiments already point the way to a less punitive regime. In 2011, Georgia State launched Panther Retention Grants, small awards that allow juniors and seniors to settle their unpaid balances if they meet academic criteria and agree to financial counseling; more than 4,000 Panthers benefited in the program’s first four years.

Many communities are developing their own small-grant initiatives, funded by local philanthropy, to allow adults to settle past obligations and re-enter higher education. One can only hope that such experiments will be assessed, refined and replicated as best-practice models.

But institutional debt is too pervasive to be solved through piecemeal efforts. Wholesale change is needed on the part of state higher education systems, administrative professional associations, national consortia and government policy makers. The goals for a new paradigm seem to me clear. On the one hand, it should aim to maximize students’ ability to persist, return and complete their studies, while minimizing the effects of financial stress on their academic status and progress. On the other hand, it should aim to maximize institutions’ capacity to retain and support students, while minimizing their exposure to financial loss and moral hazard.

Let me offer three sets of proposals for advancing such a paradigm shift -- or at least prompting debate about what it might look like. They concern data, credits and money.

First, we need better information about the scale and structure of institutional debt. How many current and former students owe unpaid balances? How much, and for what? What academic progress had they made? How do these patterns of debt, stopping out and credit earning break down by academic sector, geography and student demography? These are questions that can’t be answered institution by institution. They require the expertise of big-data agencies like the National Center for Educational Statistics or the National Student Clearinghouse.

Yet, even in advance of such findings, academic institutions should move to end the widespread, automatic use of bursar’s holds and embargoed credits. It ought to be standard practice for current and former students to freely access official transcripts and to transfer or reactivate credits they have earned and paid for. It should be standard practice for current students to maintain their status even when they are in arrears. (There will be limiting cases, of course, debt thresholds above which students can’t re-enroll, but that ceiling should be high.)

In the long run, we need an independent credit repository, perhaps maintained by the National Student Clearinghouse, that tracks all credits from all institutions on behalf of all students. In a world of transfer, swirling and serial enrollment, credits should be known, owned and controlled by the student, not the college.

Finally there’s the matter of money. Given the pervasiveness of institutional debt, programs like Georgia State’s Panther Retention Grants -- combining small awards, academic criteria and financial guidance -- should be part of the aid repertoire of all institutions, systems and government aid programs.

Innovative financial strategies are also called for. Current students and returning adults should have the option of rolling their institutional debt -- alongside their loan debt -- into income repayment plans, settling obligations to both their lenders and their alma mater through future earnings. Institutions can offer “finish-line” discounts that reduce unpaid balances as students near completion. Perhaps there should be a periodic “debt jubilee” that forgives the obligations of returning adults -- not unlike the tax holidays or firearm amnesties that governments have used effectively.

These broad-brush ideas may have unintended consequences; I’m sure they will require fine-tuning. But I’m equally sure about the scale of the institutional debt crisis and the need for new policies and practices.

Ending (or reducing) this problem won’t end the larger crises of affordability, completion and loan debt. But it will remove (or reduce) one way in which higher education has made them worse.

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