At 19, Karly Schwab was hit with a debt that would take her seven years to pay back to the University of Colorado Boulder. It stemmed from her parents filing for bankruptcy, she said, a move she didn’t realize would affect the federal loans she’d used to pay for school her freshman year.
“My sophomore year, it did impact the loans that I was eligible for, but that wasn’t something I realized until I already had started the semester,” Schwab, now 27, recalled. “At that point, I didn’t think too much better of it and decided that I should just finish the semester.”
Saddled with a financial burden she’d carry for years, she then dropped out of school and started working.
“I moved a lot and I didn’t really get notices from (CU Boulder), until the point that I was like, in with a debt collector, which ended up almost doubling the debt I had already owed,” Schwab said.
Schwab wanted to finish school: “I’ve always wanted my education. I’ve always wanted my degree,” she said. But until she paid off the last of the debt in February, she wasn’t able to access the credits she’d completed — keeping a degree out of reach.
“I now have all the credits I need to get my associates degree so I’m like, almost there, but the fact that it took me seven years to be able to pay this off and continue my education, it really just put such a damper on my life,” Schwab said. “And yeah, it’s hard to get a good job that pays well to pay off these debts if I can’t continue my schooling.”
Until this month, Colorado institutions of higher education were legally allowed to withhold a transcript or diploma from any current or former student who owed money to a school. The debt could total anywhere from a few dollars for a parking ticket to thousands of dollars for class credits, as in Schwab’s case.
That all changed on April 21 when Gov. Jared Polis signed House Bill 22-1049 into law. The legislation — sponsored by Reps. Jennifer Bacon of Denver and Naquetta Ricks of Aurora, along with Sens. Jeff Bridges of Greenwood Village and Brittany Pettersen of Lakewood, all Democrats — requires colleges and universities to provide a transcript to most students who need one to apply for a job, continue their education or join the military, regardless of whether the student owed a debt to the school. The prohibition does not apply to foreign students.
The law doesn’t mean the debt will disappear for people who owe money to a school, but transcript withholding can’t be used as a debt collection tactic in many cases.
“Unfortunately, we’ve seen even through the pandemic, these last couple of years, that people have to make hard decisions on what they can pay for,” Bacon said at the bill signing, “and to know that a transcript or a diploma can be held up from parking tickets just breaks all of our hearts.”
The law was backed by New Era Colorado, which advocates for young people at the Capitol on progressive issues such as student debt reform and economic justice. During the pandemic, New Era started hearing from people who were trying to get a job or continue their education but found themselves barred from accessing their transcript because of unpaid debts, explained Morgan Royal, the organization’s interim deputy director.
“At the end of the day, we fundamentally believe that you should have access and control over those really important documents, because you should have access and control over your education,” Royal said in an interview.
Institutions warn of dire financial consequences
Republicans, siding with the Colorado colleges and universities that warned the bill could harm their financial viability, opposed HB-1049. During Senate debate, some cited troubling figures provided by the colleges and universities that lobbied against the legislation or pushed for significant changes.
“Higher education institutions have said the impact on tuition, if we lose this ability to cause people to pay for that which they owe, would be (an) 8 to 14% tuition increase,” said Sen. Paul Lundeen, a Monument Republican. “That’s massive. So what you’re doing then is you’re increasing the burden of higher education on everyone to protect a limited few who are choosing not to interact in a meaningful client-business relationship” by paying off their debts.
Jeremy DeLeon, an accounts receivable specialist at Colorado Christian University, told members of the Senate Education Committee during a March 17 hearing that HB-1049 would force the school to send more students to debt collection — which comes with added fees for the institution as well as harms for those students.
“We must ask ourselves, where is the accountability?” DeLeon said. He explained that once students with unpaid debts requested transcripts, the school helped them set up a payment plan so they could pay off the fees they owed in order to access the documents. The payment plan would allow those students to avoid getting sent to an outside debt collection agency.
Sen. Barbara Kirkmeyer, a Brighton Republican, introduced an amendment to HB-1049 on the Senate floor that would have required indebted students to enter into a payment plan with a college or university before receiving access to their transcript or diploma.
Institutions “were very clear that if there isn’t a required payment plan,” she said, “if they can’t get the student to pay in a reasonable amount of time, that they will send it to debt collection.” That comes with adverse consequences for the student, lowering their credit rating and thus preventing them from being able to buy a car or a house in the future, she pointed out. Bridges said the provision of a transcript shouldn’t be dependent on a payment plan, and Kirkmeyer’s amendment lost in the Democratic-controlled House.
Advocates question schools’ arguments
Arguments against HB-1049 echoed those used by colleges and universities elsewhere in the country to justify withholding transcripts from students who owe debts, according to Winston Berkman-Breen, deputy director of advocacy and policy counsel at the Washington, D.C.-based Student Borrower Protection Center. Berkman-Breen’s organization has supported legislative efforts to restrict or prohibit transcript withholding in states including Colorado, Washington, California, Maine and New York.
“The practice of withholding transcripts, up until a couple of years ago, was just the norm everywhere for basically every school,” Berkman-Breen said in an interview. “So it’s coming from a place of being almost so normal it wasn’t even remarkable except for the people who it was really adversely harming.”
When asked about how much prohibiting transcript withholding would cost them financially, schools would add up the debt they were directly owed by former students, which could amount to millions of dollars, Berkman-Breen said.
“But then when probed,” he added, “they couldn’t actually tell you on an annual basis how much they brought in because of transcript withholding as a tool.” He described the calculations as “bogeyman accounting.”
“It’s very different to talk about your outstanding balance writ large versus the efficacy of the one tool we’re trying to prohibit in collecting on that balance,” Berkman-Breen said.
Limited data is available to demonstrate how effective the practice of transcript withholding actually is in getting students to pay off debts. However, opponents of the practice have their doubts. They argue that with or without the ability to withhold transcripts, schools can communicate with students about unpaid debts, ask them to enter a payment plan or ultimately send them to debt collections.
A 2018 research paper by attorney Rebecca Maurer for the Student Borrower Protection Center found that transcript withholding by higher education institutions in Ohio recovered about 7 cents on every dollar for those schools.
“Transcript withholding as a practice is just so unproductive,” Royal said, pointing out that many people don’t know they owe money to a school until they try to access their transcript. “It’s a passive debt collection tool.”
Law includes data collect
ion, accountability requirements
HB-1049 addresses the dearth of data around transcript withholding by requiring institutions to report annually, starting in 2024, on the number of students from whom they withhold documents and the number of past-due accounts sent to debt collection. This information will be compiled by the Department of Higher Education and reported to state lawmakers.
The final version of HB-1049 requires institutions to provide a transcript or diploma for students who can demonstrate they need it for one of five specific purposes: to apply for a job, transfer credits, apply for financial aid, join the military or National Guard, or pursue “other postsecondary opportunities.”
Colleges and universities are required under the new law to develop policies that explain how a current or former student can verify they need their transcript or diploma; and provide the opportunity, but not the requirement, for the student to establish a payment plan. However, the law does not say exactly how institutions may require proof that the document is needed for one of those purposes.
An amendment to the bill in the Senate sought to provide some accountability by allowing the student loan ombudsperson, an existing position in the state attorney general’s office, to investigate and track complaints from students who face barriers to accessing their documents.
“No one’s job is done when the law is passed. Implementation is so important,” Berkman-Breen said. “The schools should make it very clear on their websites: If you are doing any of these five things, you have to get your transcript no matter what. They can’t bury this in the fine print.”