Federal Government to Enact Strict Rules Against Transcript Withholding

New federal regulations will limit colleges’ and universities’ ability to withhold transcripts from students who owe their school money.

President Joe Biden’s administration finalized regulations strengthening accountability measures for colleges and universities, including a new rule that will likely cut down on transcript withholding. Many institutions use the practice as a way to incentivize students into paying back debts owed to the school, but consumer advocates have called the practice unfair to low-income students.

The federal government’s new rules state that any school that receives and distributes federal financial aid may not withhold transcripts if the student owes funds due to an error committed by the college or university.

Perhaps more important, however, is the stipulation that even when a school didn’t commit an error, an institution must provide transcripts for any period that a student received federal financial aid and did not have outstanding debt to the school. That means that students with institutional debt may not be able to access their complete transcripts, but they will be able to request transcripts for periods in which they paid all institutional charges.

This addition is in contrast to what the Department of Education (ED) proposed in early 2022 during negotiated rulemaking.

ED proposed at the time that it would bar transcript withholding only in cases of an error from the institution. Negotiators — primarily consumer and student advocates — said in early 2022 that this suggestion doesn’t go far enough to minimize the harmful impacts of transcript withholding, which includes a student’s inability to transfer if they cannot access their transcripts.

“[Transcript withholding] is a large problem, so with large problems you have to put forward good, substantial solutions,” Amanda Martinez, who represented civil rights organizations, said at the time. “This is not that.”

Carolyn Fast, director of higher education policy at The Century Foundation and a negotiator during the rulemaking process, told BestColleges that ED’s final regulations are a step in the right direction. Still, there’s room for improvement.

“This is a clear improvement over the status quo, where a school can withhold a transcript for the student’s entire college career over a small outstanding balance,” she told BestColleges. “But, it is not as expansive as a full ban on withholding transcripts as a debt collection tool.”

This transcript withholding rule will become final on July 1, 2024. The department may choose to implement the rule earlier than that date.

In the meantime, Fast and other experts say there remains some confusion about how ED would apply this rule in the real world.

For example, Student A attended a community college for four semesters but accrued an institutional debt during their fourth semester. The new rule dictates that when they attempt to transfer, they are provided the transcripts for their first three semesters.

Student B also attended a community college for four semesters, but accrued an institutional debt during their first semester. If they did not accrue any additional debt in semesters two, three, and four, would they be able to access transcripts for those three semesters, or would the fact they still have the institutional debt mean they can’t access any transcripts?

An ED spokesperson told BestColleges that institutions may withhold transcripts for credits not paid through federal financial aid when the student owes a balance “for those respective payment periods.”

The inclusion of “payment periods” suggests that the transcripts for any credits earned while a student had an unpaid balance are liable to be held by the institution.