Fewer Stranded Credits: New Rules Ban Withholding of Most College Transcripts

This article is a follow-up to our article on Stranded Credits posted in June 2023. New federal rules will affect potential withholding of transcripts for unpaid funds.

Students who leave college, either by withdrawing or graduating, but still owe money to the college, may not be able to access their official transcript of work completed until they are able to pay their outstanding balance. The college withholds the student’s transcript and thus their credits are “stranded”  until they are able to pay. This often prevents some students from being able to transfer to another institution or to get a job. According to research by New York non-profit Ithaka S & R Research, this may affect over six million students.

New federal rules may change this. The Education Department submitted a package of new rules  last spring aimed at increasing clarity and transparency around student aid, and requiring colleges to present financial aid information to students and their families more clearly. The new rules were approved in late October 2023, and will go into effect on July 1, 2024.

Part of the Education Department’s new rules will prevent an institution from withholding a student’s transcript for any term in which the student received Federal Financial Aid and paid off their tuition balance for that term. Edward Conroy, a policy fellow at New America explains, “Because in most cases even when former students owe larger debts, nobody owes a debt for the entirety of their degree. It might be for their last semester or something like that.” This means that a school may only withhold transcript information for terms in which there is an unpaid balance or in which the student received no Federal Aid.

In practice, this may mean that a school can withhold transcript information for some, but not necessarily all semesters. Information for any semester in which tuition was paid must be released. For some schools, separating out these semesters for transcript release may be too difficult a task and they may simply release the entire transcript. Others may withhold information only from certain semesters.

According to James Kvaal, Education Department Under Secretary, “Confusing information is widespread. . . [These regulations] will give students some common-sense protections like clear information on the true cost of college and access to their transcripts when their courses were federally funded.”

These new Department of Education regulations mean that colleges and universities will be required to be more transparent about financial obligations at the outset of a student’s college experience. It is still not clear exactly what this will mean for institutions, but more transparency and accountability are likely in the future. The hope is that with more accurate information as a student begins college, there will be less chance that they will be unable to pay tuition for all semesters and so will be more likely to complete their education.

In the meantime, parents and students should ask financial questions early on to be sure that they have an entire picture of finances for all four (or more) years of college and that they distinguish scholarships and grants from loans that will need to be repaid. Our earlier article on stranded credits suggests some other actions parents and students can take to help them navigate finances and financial aid.

There are many details to be worked out between now and the rollout of these new regulations in July 2024, but many students, and their parents, may soon have a clearer picture of college finances and may have access to their transcripts and stranded credits.

Related Articles:

What Are Stranded Credits and Why Do They Matter?

What’s Your Student’s Transcript Story?


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