Colleges that lend directly to their students cannot later refuse to release a student’s transcript as a way of forcing them to make loan payments, the Consumer Financial Protection Board said on Thursday, calling the practice “abusive” and a violation of federal law, the New York Times reported. The loans made directly by a college, rather than a traditional lender, are used to pay for classes, but they don’t come with the same protections as federal student loans do. Hundreds of thousands of students at for-profit colleges have taken these loans, which are known as institutional loans, and they’re also offered at some public and nonprofit institutions. The consumer bureau’s ruling was aimed at stopping the colleges from withholding transcripts from students who haven’t repaid the debt. One college that the bureau examined refused to release transcripts to students in default until the full amount had been repaid, even when students had entered into a payment plan. Transcript withholding can make it difficult for students to apply for jobs even if they’ve graduated, since they can’t prove to prospective employers that they have a degree. In some cases, graduates can’t take a job certification exam without a transcript, effectively barring them from employment in the field they studied. Without a transcript, students also can’t transfer their credits to another college if they want to pursue a different career or if they’ve finished a two-year degree and want to earn a bachelor’s degree. The bureau said that blanket policies that use transcript withholding as a way to collect these debts are “designed to gain leverage over borrowers and coerce them into making payments.”
