Students traditionally have a soft spot for their alma maters. But as growing numbers of students run up debt in the high five and even six figures to pay for college, that may change. Especially when they discover their old school is actively blocking them from getting a job or going on to a higher degree.
That's what increasing numbers of students are finding when they try to obtain an official transcript to send to potential employers or graduate admissions offices.
It turns out many colleges and universities refuse to issue these critical documents if students are in default on student loans, or in many cases, even if they just fall one or two months behind.
This is happening at a time when recent grads are finding it particularly hard to find work, not just in their chosen fields, but anywhere. About half of recent college degree-holders were unemployed or underemployed last year, according to an Associated Press study released last week. And the federal Consumer Financial Protection Bureau estimates student loan debt has passed $1 trillion, an amount greater than all outstanding credit card debt. The Department of Education put the default rate at 8.8% of student borrowers as of September 2010.
It's no accident that colleges are using the withholding of official transcripts to punish students behind in their loan payments. It turns out the federal government encourages the practice. Schools are not required by law to withhold transcripts, but a spokeswoman at the Department of Education confirmed that the department "encourages" them to use the draconian tactic, saying that the policy "has resulted in numerous loan repayments."
It is a strange position for colleges to take, however, since the schools themselves are not owed any money. Student loan funds come from private banks or the federal government. For federal Perkins loans, schools get a pool of federal money to apply to students' financial aid, and if students don't pay, that pool gets smaller. But the creditor is still the government, not the college. And in the case of so-called Stafford loans, schools are not on the hook in any way; they are simply acting as collection agencies, and in fact may get paid for their efforts at collection.
In Southern California, USC's website makes it clear that unmet loan obligations can prevent students from getting transcripts. As for the University of California, Kate Jeffery, director of student financial support for the system, says transcripts are withheld in the case of delinquent Perkins loans. She concedes it's a difficult issue but says that "it's the only tool we have to make them pay."
Schools don't keep transcript extortion a secret, but for many students who miss the fine print, it's a cruel surprise. A music major — and summa cum laude grad — at Philadelphia's Temple University was making payments on his $62,000 student debt after graduation while working as an adjunct professor for Temple. Laid off after three years, he was unable to find work, fell far behind in his payments and went into default. He decided to try to return to school to earn a doctorate and better his chances of getting teaching work. He was accepted at another university and offered free tuition and a $26,000-a-year stipend for five years. That would allow him to clear his default and defer his loans until graduation. The problem: The grad school program requires an official transcript of his Temple work, and Temple so far has said no.
He asked that his name not be used because he's afraid it would only make it harder to get help from Temple. "With these policies," he told me, Temple is "helping to crush" students who will "end up with debt that they can never repay."
Andrew Ross, an NYU professor who helped spark the Occupy Student Debt movement in November, says of the no-transcript tactic: "It's worse than indentured servitude. With indentured servitude, you had to pay in order to work, but then at least you got to work. When universities withhold these transcripts, students who have been indentured by loans are being denied even the ability to work or to finish their education so they can repay their indenture."
The Obama administration, which has made much of trying to ease the student debt burden, could with a simple directive reverse the Education Department's recommendation that schools withhold transcripts. It's past time to do just that.