7 July 2022 / Jennifer T. Dillow

Transcript Withholding: The Condition of Student Debt in 2022

Educational-related debt has garnered national attention. In fact, U.S. student loan borrowers collectively owe nearly $1.75 trillion in private and federal student loan debt, according to the Federal Reserve Bank of St. Louis. Therefore, it’s not surprising that debt collection practices concerning educational-related debt (including the practice of transcript withholding, a debt collection tool utilized by many schools, colleges, and universities across the nation) have come under scrutiny.

Transcript withholding is often used by educational institutions when students fail to fulfill their contractual or financial obligations to the institution, leaving an unpaid balance for loans, tuition, or other fees. Often, this practice is typically disclosed within an institution’s enrollment agreement. Unlike certain other loans that are secured by collateral and subject to repossession, if the student becomes delinquent and defaults, educational institutions cannot repossess the education, training, or other skills they have instilled in their students.

The scrutiny of transcript withholding has been immense with critics, often referring to the practice as “transcript ransom.” In fact, the U.S. Department of Education secretary Miguel Cardona called on educational institutions to end the practice altogether in a keynote address at the 2021 FSA Training Conference.

On April 18, 2022, the Consumer Financial Protection Bureau (CFPB) also criticized the practice of transcript withholding as a method to collect outstanding debt in a blog post and made it clear that the CFPB would examine the practice.

Several states have either enacted legislation or introduced bills to ban or place restrictions on the practice of transcript withholding. These states include, but are not limited to, California, Colorado, Connecticut, Illinois, Louisiana, Maine, Minnesota, Ohio, New York, and Washington.

As more states introduce legislation concerning transcript withholding, educational institutions that leverage the practice for debt collection may need to rely more heavily on the few other options that are available. These options may include the use of collection agencies or taking legal action against the student. As these options may be more costly to the educational institution, individual policy determinations should be made as to whether these options should be utilized for the particular debt at hand.

It is important for educational institutions to work with counsel and ensure that their policies, procedures, and practices are compliant with the most up-to-date law involving transcript withholding. Educational institutions should consider implementing policies and procedures that seek to prevent student account delinquencies, and should periodically review those policies and procedures for improvements, if already in place.

Our team is constantly monitoring this issue. If you have additional questions, please connect with attorney Jennifer Dillow at any time.

This blog is not a solicitation for business and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.

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Jennifer T. Dillow


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