The obscure debt holding back thousands of students

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For years, Micaela Font has dreamed of becoming a nurse, but there’s $842 standing in her way.

That’s how much money Font, 33, owes to an Atlanta-area college she attended for three and a half semesters beginning in 2015. And until she pays that money back, the school won’t release her transcript, which she needs to continue her education.

In the roughly three years since financial pressures and other circumstances pushed Font to leave the Atlanta area and move closer to relatives in Knoxville, Tennessee, she’s been searching for ways to pay back those funds and return to school.

She set up a payment plan with her old college, works a full-time job, picks up extra shifts as a certified nursing assistant and drives for Lyft — though she’s had to stop temporarily because her car unexpectedly ended up in the shop. Font has also sought out help from local churches and advisors employed by the state to assist adult students attending college.

But with her expenses — Font has a 15-year-old daughter to support — she can’t scrape together the funds to get her transcript back and continue pursuing her dream of becoming a nurse. “The amount that they said I owed, I just kept thinking in the back of my head how in the world did they expect me to pay that?” Font said. “I cried a couple of times, but I had to get over it and figure out what to do — there’s got to be a way.”

A widespread, but under-discussed problem — with larger economic implications

Font is one of at least thousands of students across the country whose educational future is being put in jeopardy by a bill owed to a college or university. Colleges typically withhold students’ transcripts if they owe a debt to the institution. Sometimes that’s an unpaid library or parking fine or in cases like Font’s, a college may hold a student liable for federal financial aid funds, including grants, if they withdraw at the wrong time.

The true scope of the problem is hard to gauge, but research published Friday by the Student Borrower Protection Center, a student loan borrower advocacy organization, aims to provide a window into these debts and the challenges they pose to students.

In Ohio alone, there are almost 400,000 open collection accounts that are tied to balances owed to the state’s public universities, according to an analysis conducted by Rebecca Maurer, a Cleveland-based student loan attorney and a fellow at the SBPC.

Though it’s hard to know for certain whether all of those accounts are associated with a withheld transcript, it’s likely that’s the case, said Maurer. Through public records requests, Maurer asked for information from every public college in Ohio about their policies related to past-due balances owed to the school. Every college that replied said they withheld transcripts over these issues, Maurer said.

“That is just a phenomenal amount of economic potential that’s being locked up in these transcripts,” Maurer said.

How a vicious cycle traps students

Maurer’s analysis focused on Ohio because that’s where she’s based, but the challenges posed to students by money owed to their schools is widespread. Seth Frotman, the executive director of SBPC and the former student loan ombudsman at the Consumer Financial Protection Bureau, said that while at the CFPB he and his team regularly heard from students trapped by funds they owed to their institution.

These students are caught in a vicious cycle. They can’t afford to pay off the debt to their school and without their transcript, they can’t continue their education to increase their earning potential. The challenges these debts pose to students completing their college degree not only have consequences for the students themselves, but for the economy more broadly.


‘When we talk about the student debt crisis we always talk about it in terms of the $1.5 trillion in student loans, but in many ways that is even underselling and underappreciating the true scope of the harm.’


— Seth Frotman, executive director of the Student Borrower Protection Center


“When we talk about the student debt crisis we always talk about it in terms of the $1.5 trillion in student loans, but in many ways that is even underselling and underappreciating the true scope of the harm,” Frotman said. “As policymakers at the federal and state level think about how they can stand up for student loan borrowers, reforms to these policies ought to be on the table.”

In a blog post on the SBPC site, Maurer argues that there’s an intersection between transcript withholding and state property law, because it could be argued the transcripts are students’ personal property. That leaves an opening for state lawmakers to act on this issue, she contends. Already, a member of California’s State Assembly has proposed a bill that would forbid schools in the state from withholding a student’s transcript over an unpaid debt.

Some students are on the hook because of an obscure law

Colleges of all types regularly withhold transcripts over past-due library fines, parking tickets and other relatively small bills. But perhaps one of the most insurmountable types of debt owed to schools that students encounter has to do with an obscure federal financial aid regulation.

The rule, known as Return to Title IV, requires that if a student using federal financial aid drops out before completing 60% of a term, any portion of the aid they haven’t technically “earned” from attending the school must be returned to the federal government. Often schools will simply return the aid back to the government on behalf of a student, typically because the aid went directly from the government to the school initially.

The school will then hold the student liable for those funds, even if they came from a Pell grant, the money the government provides for free to low-income students to attend college.

The student has “been told this is free money,” but if they withdraw at the wrong time, “they actually become liable for those funds,” said Sheri Gonzales Warren, the vice president and director for KC Rising, a Kansas City-based organization that works to accelerate the area’s economy.

In some cases, the bills can approach thousands of dollars, particularly if the schools send the debts to collections and add fees or interest, said Warren who has worked for years with adult students trying to return to college.


‘In most instances that we’ve come across, the student just doesn’t frankly have the money to pay it’


– Sheri Gonzales Warren, the vice president and director for KC Rising


“In most instances that we’ve come across, the student just doesn’t frankly have the money to pay it,” Warren said.

A few schools erase the debt after 10 years

Over the past several years, Warren’s organization and others have been working with nonprofits and colleges in her state to find ways these students can mitigate the debt. One organization offers grants to students that they can use to pay bills owed to an old college if they’re returning to school.

And in response to their advocacy, some colleges in the region have developed their own approaches to the debt, including discharging it after 10 years or forgiving part of the debt owed by former students if they return to that specific school.

That solution is gaining traction across the country, thanks to a program Detroit-based Wayne State University launched with much fanfare last year. The initiative, called Warrior Way Back, forgives up to $1,500 in debt former students owed to the school if they return.

Steps students can take

But most students who find themselves struggling to get their transcript aren’t so lucky, Warren said. She suggests they ask their former college exactly how much they owe, whether they can get on a payment plan and if there are any emergency funds available to cover these types of situations.

However, even when students ask those questions, they often learn their school doesn’t offer a solution, Warren said. The schools “use that transcript almost like collateral for repayment of whatever that debt is,” she said.

For many adults returning to school, paying back these debts can be “the hardest barrier to overcome,” said Julie Szeltner, the senior director of adult programs at College Now Greater Cleveland, which works to help students access higher education.

Right now, her organization has its own “imperfect solutions” for helping students deal with this problem, including by obtaining no interest loans from a nonprofit to cover the fees owed to a school. But Szeltner said she’s also working towards a broader fix for this problem. She’s started talking more with state legislators about the challenges students face accessing their transcripts in hopes the lawmakers will consider doing something about it.

“If you think about the whole push for attainment goals across the country,” Szeltner said, referring to the targets policymakers and others have set for getting more students to and through college, “if this isn’t addressed then there’s no way anybody is going to reach those attainment goals. People can’t go back to school even if they want to.”

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