In early October 2019, the California State Legislature passed Assembly Bill 1313 (AB 1313), a new law that prohibits public and private colleges and universities from withholding transcripts as a debt collection tool. The law states that schools shall not:
- Refuse to provide a transcript for a current or former student on the grounds that the student owes a debt.
- Condition the provision of a transcript on the payment of a debt, other than a fee charged to provide the transcript.
- Charge a higher fee for obtaining a transcript or provide less favorable treatment of a transcript request because a student owes a debt.
- Use transcript issuance as a tool for debt collection.
The bill, signed into law by Democratic Gov. Gavin Newsom, faced little opposition from California lawmakers and was ultimately passed by both chambers of the state legislature without a single vote against it.
California’s Public Campuses Weigh In
While lawmaker opposition to the bill was virtually nonexistent, bursar and student account office professionals at schools throughout the state were understandably apprehensive when the law was first proposed. Officials at the University of California (UC) System office confirmed to NACUBO that they did oppose the bill "due to the authority and discretion it took away from registrars, business officers, etc." But the UC System, which is the smaller of California’s two public higher education university systems, is ready and willing to comply with the law’s directives.
Gina Curry, associate vice president for financial services at Sacramento State, which resides within the larger California State University (CSU) System, offered insight into her campus’s thoughts and actions on the bill. While the CSU System also shared concerns with lawmakers prior to the bill’s passage, Curry said that ultimately the CSU schools didn’t strongly oppose the bill because "this legislation is about trying to break down barriers for students who struggle, which is a pillar of the CSU System, and we want to enable them to succeed." She added that "the legislature was trying to make clear with this bill that we need to be helping students make progress, and we want to address student needs and particularly the needs of higher risk students."
Curry confirmed that the law will "create challenges for student financial aid and bursars’ offices because outstanding debts do need to be collected so we can be successful in running our university." But she also shared that, even prior to passage of this law, her bursar’s office frequently released transcripts directly to potential employers or a new institution for current or former students with existing debts after some debt resolution was agreed upon. As Curry put it, "We didn’t want to be in the position of keeping a student from getting a job or attending a new school." Moreover, her office has found that aiding students in this way often reestablishes a connection with individuals who aren’t necessarily aware that they have an outstanding debt, ultimately helping them get back on the path to debt repayment.
The next steps for the CSU System will be to track and develop data on the impact this law has over time on the system’s average receivables on both a campus-by-campus and systemwide level. Curry noted that it is "too soon to tell" what impact the law may have, but that it will certainly require a change in their collection policy. While California’s legislature has historically been "really, really generous about providing [the CSU System] money for student success initiatives," Curry said she hopes that "the state is prepared to fund our schools to cover the associated losses stemming from this legislation."
The Private Perspective
But what about California’s private colleges and universities? While this new law applies to both public and private institutions, private schools likely won’t be able to count on lawmaker appropriations to cover losses associated with the law. They also lack other critical debt-collection tools that public schools can employ by virtue of being public instrumentalities, such as tax offsets and wage garnishments. While the state’s public institutions may have been reticent in the past to take these slightly more extreme measures to collect on outstanding debts, in the wake of this new law the option to do so now provides them with some security, being one of the few avenues for collecting debt that does not require them to develop new methods. For private colleges and universities, their most impactful option for debt collection is now likely to be sending outstanding bills to collection agencies in the hopes that the potential threat of a negative impact on a credit report will prompt debtors to pay.
Matthew Ward, vice president for enrollment management and marketing at California Lutheran University (Cal Lutheran), a private liberal arts institution in Thousand Oaks, explained to NACUBO that the law is prompting his institution to review its current tuition collection practices and repayment plans available to students. Like its public counterparts, Ward’s campus understands and agrees with state lawmakers’ commitment to student success; Cal Lutheran is a designated Hispanic Serving institution and currently one-third of its student population is Pell-eligible. However, unlike its much larger public counterparts, which tend to have a variety of revenue streams, funding campus operations at Cal Lutheran is highly tuition dependent, as with most small, private institutions. Of the school’s annual operating funds, 72 percent come directly from tuition revenues, meaning that outstanding tuition debts have very real impacts on what the campus can achieve. According to Ward, the school is looking into creating payment schedules in order to eliminate the possibility of students having outstanding debt at graduation as a direct result of AB 1313. This is a deviation from many of its current repayment plans, which are "designed to create flexibility" for student repayment and "often extend beyond graduation."
Ward highlighted that he doesn’t think students will be looking to "game the system" as a result of this law. "I don’t think this bill is a beacon to students looking for nonpayment," said Ward, but he did express concern that state lawmakers did not do their analytical due diligence before passing the law. Ward elaborated, "I question whether [this law] will actually serve those who are the most vulnerable in higher education … I wonder if there was any data to support that." Ward also noted that there could very well be unintended consequences for students at private institutions as a result of this law. "Schools will need to find a way to make sure that they’re legally protected to collect outstanding debts; those ways will likely add extra costs for schools that may ultimately be passed on to students via the cost of attendance."
An interesting textual loophole in the law does make some provisions for items colleges and universities can still withhold for nonpayment, including the provision of both grades and diplomas. In effect, it is possible for schools to technically be in compliance with the law by providing a transcript to students who owe a debt—but one that does not actually list grades. However, a commitment to student success makes all the institutions with which NACUBO spoke extremely hesitant to consider this as an option.
While it is too soon at this early stage of implementation of the law to tell how large or small of an impact it will have on campuses’ bottom lines, both public and private institutions will undoubtedly need to find a new balance that enables student achievement while keeping campus bills paid.
NACUBO CONTACT Megan Schneider, senior director, government affairs, NACUBO, 202.861.2547