A New Plan to Save Stranded Credits

When a student leaves college prematurely without paying the balance on their account, the institution typically withholds the student’s transcript, resulting in stranded credits that can make it difficult for the student to resume their studies later or transfer to another college. Student debt analysts and higher ed advocates have long argued that the practice takes a tremendous personal toll on students, particularly the most disadvantaged. Now Ithaka S+R, a higher education consulting firm, has launched a pilot program that aims to address the twin issues of stranded credits and unpaid debt.

The first-of-its-kind plan, announced last month, will allow students who have credits stranded at one of eight northeast Ohio institutions to settle their bills—allowing for some measure of debt forgiveness—and have their transcripts released as long as they re-enroll at one of the other schools in the consortium. It could benefit as many as 60,000 students, Ithaka S+R said.

The idea grew out of research the company did on students who dropped out or took time off and couldn’t return to school because unpaid debt froze their transcripts, said Martin Kurzweil, program director of educational transformation at Ithaka S+R. The financial repercussions were far-reaching, the research showed: students with stranded credits faced collector’s fees of up to 30 percent and federal financial aid charges that reached thousands of dollars. Unpaid debt and collection fees stayed on a student’s credit report, impeding for decades their ability to, for instance, get a mortgage.

Kurzweil noted that some institutions offer stranded credit programs that are “incomplete” because they allow returning students to re-enroll only at the same institution. Yet data show that the vast majority of students who stop out re-enroll at a different institution. And even in states that ban transcript withholding, such as California, the issue of student debt is not always addressed, creating another barrier to releasing stranded credits, Kurzweil said.

“We realized that there was an opportunity to do something where we could break through a collective action problem,” Kurzweil said. “Getting the students back enrolled benefits the students and benefits institutions.”

The pilot program aims to tackle all issues surrounding stranded credits, Kurzweil said. It includes “proactive” outreach from the eight institutions, Ithaka S+R and regional community-based organizations to help eligible students find suitable re-enrollment within one of the eight institutions: Cleveland State University, Cuyahoga Community College, Kent State University, Lakeland Community College, Lorain County Community College, Stark State College, the University of Akron and Youngstown State University.

Students who enroll at a different institution from the one they started at will periodically pay off a fraction of the money they owe, Kurzweil said, which is mutually beneficial. The student pays less, but even a nominal payment also helps the institution, as long as the rate is higher than the expected return from collections—which is only about seven cents on the dollar in Ohio, Kurzweil said.

Specific details of the program will be worked out in the coming months, Kurzweil said, including the amount of debt to be forgiven, what happens to the remaining debt and how students qualify for the program. The goal is to start outreach to students this spring and begin re-enrolling them in fall 2022.

According to research from Ithaka S+R, 95 percent of institutions withhold transcripts when students have a balance, and an estimated 6.6 million students nationwide have stranded credits. Students with stranded credits owe an estimated $15.4 billion to their former institutions, Ithaka S+R found, with the average balance ranging from $631 for community college students to $4,400 for students at research universities.

In Ohio, 222,000 individuals have stranded credits, with 60,000 of those located in northeast Ohio, research shows. If just 10 percent of those 60,000 people re-enrolled in one of the eight participating schools, it could bring those institutions $41 million in annual tuition revenue.

Kurzweil noted that the issue of stranded credits and withheld transcripts disproportionately affects Black, Latinx, Indigenous and lower-income students. Since transcripts are often a requirement for employment, stranded credits can affect students’ employment status and limit their housing options. The debt accrued from institutions can also affect students’ credit scores.

“In terms of transcript holds, students who want to continue their education are not able to apply their previously earned credits to continue their education, and they have to start over,” Kurzweil said. “And that means that they’re duplicating courses, which wastes money, wastes time and is highly demotivating.”

David Jewell, chief financial officer at Cleveland State University, said his institution was drawn to the pilot program as an extension of Cleveland State’s Reconnect to College program, which is designed to re-enroll students who previously dropped out of the university by giving them financial aid, academic support and advising on how to re-enroll.

The Reconnect to College program features a Project Re-start Debt Forgiveness program, which allows Cleveland State students with a GPA of 2.0 or above to request debt forgiveness for previous semesters by agreeing to a set of requirements, including completing all coursework in good academic standing, meeting regularly with an assigned academic adviser and paying for the current term in full.

“How can we begin to help students with stranded credits get back in our classrooms and get out into the workforce with a college degree, whether that’s from a community college or from a four-year public university?” Jewell said. “That’s the impetus for Cleveland State’s own initial program, Project Re-start, and this pilot program just expands on that line of thinking.”

Marisa Vernon White, vice president of enrollment management and student services at Lorain County Community College, said the initiative is particularly well timed to help students who had to stop out or leave the college during the pandemic for employment or childcare reasons.

“This is something bigger than just LCCC,” Vernon White said. “This really is part of that regional work and that statewide work to increase the attainment levels in education for all of the families that we serve around the state and here in our region.”

Stephanie Sutton, vice president of enrollment management at Stark State College, said Stark State already had a stranded credit program within the college, called the Restart My College Career program, which gives students with an outstanding balance a chance to clear their account, reducing all or part of their prior balances. Ithaka S+R’s pilot program allows Stark State to expand its outreach, Sutton said.

“We get students who might come to us who have a lot of transfer credits and they can’t get their transcript,” Sutton said. “So that really stops them from enrolling in college because it is a requirement that we have their prior transcripts. This really is just an opportunity to help students.”

Jewell from Cleveland State said one benefit of the pilot program is that it will give the eight institutions more insight into the supports that students with stranded credits need, such as transportation, childcare services or hybrid and remote learning options.

“Students with stranded credits are a large subset of our population, and if we can get better insight and data into this as eight institutions collectively, that’s where the real value is and why I think that this program can’t fail,” Jewell said.

Vernon White from Lorain County CC believes the pilot program can abolish the perception that those who left can’t come back and finish their studies and earn their degrees.

“Seeing more adult learners and those that have left higher education returning and working toward whichever degree, certificate or credential is going to be meaningful for them in this workforce is the dream,” Vernon White said.

Cher Hendricks, senior vice provost at the University of Akron, hopes the program will help more students get on track and complete their degrees, even if it isn’t at her institution.

“Succeeding on our campus might mean that students who stopped out at University of Akron go somewhere else,” Hendricks said. “So I think what a successful program looks like is that our institutions figure out how to make this project work.”

Kurzweil wants to see the pilot program expand to other parts of Ohio and other states as well. Within Ohio, one option is to form other regional groupings of institutions to share a stranded credits program, he said; another possibility is to turn the pilot into a statewide arrangement for all Ohio institutions. That could work in other states, too, Kurzweil said, but he noted that Ohio’s program couldn’t be identically replicated because each state has its own set of laws around transcript withholding.

“It’s not like you can just take all of the details of the program and apply them somewhere else and it’s just going to work,” Kurzweil said. “[But] I do think you can take the concept and apply it almost anywhere else, and you can figure out a way to make it work.”