What to Know About Stranded Credits

Sabrina Morel was three semesters into her education at CUNY Borough of Manhattan Community College in New York City, with a goal of becoming a trauma surgeon. But in the spring of 2021, her plans came to a halt.

While applying for an apartment, Morel’s college transcript was requested. That’s when she learned that it was on hold because of nearly $5,000 in outstanding fees. Until the debt is paid off, Morel would not be able to re-enroll or finish school.

This phenomenon, known as stranded credits, affects about 6.6 million students who owe U.S. colleges an estimated $15 billion in unpaid balances, according to a 2020 research report by Ithaka S+R.

“It’s a difficult situation having to pay thousands of dollars plus trying to support yourself,” Morel says. “Having that stop on your transcript is devastating. It puts a hold on your dreams.”

What Are Stranded Credits?

Many colleges maintain policies that require holds on transcripts or degrees for current and former students with outstanding institutional debt, resulting in students being unable to access their earned credits to register for classes, graduate or re-enroll, experts say.

That debt can refer not only to unpaid tuition or room and board, but also noncourse-related expenses such as unpaid parking tickets and library fees. And the outstanding debt often incurs interest. What started as a $50 parking ticket, for example, can increase by hundreds of dollars if left unresolved.

[See: 11 Surprising College Fees You May Have to Pay.]

“To think that a higher education institution, which stands for trying to help people get degrees, would actually be limiting the number of degrees over sometimes relatively trivial costs” for the institution, says William F. L. Moses, managing director for The Kresge Foundation’s Education Program.

Often, students who leave school without graduating but owe the institution money are unaware of the hold on their transcripts until years later, such as when the individual requests an official transcript for a job or the debt shows up on his or her credit report, according to Julia Karon, an analyst fellow at Ithaka S+R.

“Students find themselves in this bind where they owe money to their institution, but because they don’t have their transcripts, they are unable to get a job that would allow them to earn enough money to pay back tuition,” she adds.

Holds on transcripts can also result in lost credits for students looking to re-enroll at a different institution. For example, if a student accumulated a year and a half of credits at his or her initial institution but owed money, those credits cannot be accessed until the debt is paid off.

“If they can’t pay back that initial institution but want to pursue more education, they have to start over and all of those credits are lost,” says Catharine Bond Hill, managing director of Ithaka S+R. “It makes it more expensive and takes a longer time to get the degree. So (stranded credits) hurt educational attainment.”

[Read: An Ultimate Guide to Understanding College Financial Aid.]

How to Reduce the Risk of Earning Stranded Credits

Although taking out student loans or getting financial aid can be necessary for some students, the possible consequences and risks need to be better understood, according to Sosanya Jones, associate professor of educational leadership and policy studies at Howard University in Washington, D.C.

She recommended meeting with a financial aid counselor and building relationships with academic advisers. Counseling workshops allow students to ask questions about a variety of financial decisions, like taking out loans and the cost of withdrawing from a class.

“Institutions aren’t necessarily always user-friendly, as some of their processes and guidelines are confusing,” Jones says. “They’re not very transparent about how they’re doing business. Especially for students that are not used to a college environment and may not have anyone there helping them, they get really lost in the system.”

Ways to Resolve Stranded Credits

For students who find themselves with stranded credits, the first step is to contact the school registrar’s office and explain their situation. In some cases, exceptions are made.

“When we understood why (students) needed their transcripts released, we were making exceptions and releasing their transcripts,” says Kim Bogle Jubinville, senior vice president and chief academic officer at Southern New Hampshire University. “Which is what led us to reevaluate our policy. I would infer that a number of institutions of higher education would be doing the same thing.”

Another option is for students to inquire about whether their institution has a debt-relief program.

For example, Wayne State University in Detroit launched the Warrior Way Back program in 2018 to provide up to $1,500 in debt forgiveness for returning students. To be eligible, students must hold at least a 2.0 GPA and have not taken classes at WSU for at least two years. The debt owed to WSU is canceled over three semesters or upon graduation, whichever is sooner.

The program supports adult learners like Carmelita Steele, who had nearly $1,000 in institutional debt relieved. Over the span of a few decades, she paused and restarted her education several times due to family responsibilities. But Steele is now on track to finish her degree in political science and peace and conflict studies next semester.

“Wayne State has a very supportive program and they are one of the first to really stretch out and pull the students back in so that you can feel that you can be successful,” she says.

Other institutions such as Henry Ford College in Michigan are mirroring WSU’s model.

[Read: How to Manage Student Loans When Returning to School.]

“Stranded credits is such an insidious, widespread problem and it’s gone on so long, unnoticed, because no one’s been really talking about it,” Jones says. “It’s just been taken for granted as a part of college life, that if you owe money, you just sit out. No one really questioned it, that’s just the way business was done.”

But now, states are beginning to take notice. In 2020, the California Assembly enacted a law that prohibits a school from not releasing a transcript for a current or former student if debt is owed, among other restrictions.

Some institutions are choosing to reevaluate this and related financial aid practices and policies. SNHU, for example, recently began waiving transcript holds and fees and releasing diplomas for 2,257 students whose transcripts were withheld over the last year. The average amount those students owed was $728.

Similarly, the City University of New York in July announced plans to release 74,000 transcript holds for students enrolled in the semesters during the coronavirus pandemic who experienced financial hardship. The CUNY Comeback Program, using federal stimulus funds, also will eradicate $125 million in unpaid institutional debt for at least 50,000 students and recent graduates.

“We are very committed to our students as individuals but we are also very committed to New York City and New York state,” says Felix V. Matos Rodríguez, chancellor of CUNY. “We see this as part of our responsibility to be part of the economic recovery of the city.”

Morell was one of those students notified about the canceled debt. Because of that, she was able to continue her education at CUNY this fall.

“It was a huge weight lifted off my shoulders,” Morell says. “It really felt like someone heard me.”

Trying to fund your education? Get tips and more in the U.S. News Paying for College center.

More from U.S. News

15 Schools That Meet Full Financial Need With No Loans

Costs to Weigh Before Going Back to College as an Adult

A College Guide for Nontraditional Students

What to Know About Stranded Credits originally appeared on usnews.com

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