California Bill Would Ban Withholding Diplomas Over Institutional Debts

• Institutional debt can include any debts students owe to their college, from tuition balances to parking fines.
• The bill aims to prevent public colleges and universities from using specific debt collection methods against students with institutional debt.
• Advocates for these laws have called these practices unfair to students looking to transfer schools, re-enroll in college, or receive their degrees due to minor debts.
• If approved, the bill would prohibit schools from withholding diplomas, imposing fees, or treating students with debt unfavorably.

A proposed bill in California would prohibit public colleges and universities from employing certain collection tactics against students with institutional debt.

Assembly Bill 1160, also known as the Protecting Students from Creditor Colleges Act, would expand the protections offered by the Educational Debt Collection Practices Act, which prohibits the University of California, California State University, and California Community Colleges from refusing to provide a transcript, charging a higher fee for the transcript, or providing "less favorable treatment" of a transcript for students with institutional debt.

Institutional debts are money students owe to their college directly — unlike other education-related debts owed to a lender. Institutional debts can include tuition balances, library fees, parking fines, and administrative fees. A 2023 report from research group Ithaka S+R estimates that 6.6 million students owe $15 billion in unpaid balances to their institutions.

A bill analysis from the Committee on Higher Education estimated that more than 750,000 low-income students owe more than $390 million in debt to California public colleges.

If passed, the bill would ban schools from:

• Refusing to provide a diploma
• Withholding a diploma on the condition that the student pays a debt
• Charging a higher fee for a diploma
• Providing "less favorable treatment" of a transcript for students with debt

It also would require schools to grant a one-time exemption from an enrollment or registration hold for students with debt.

The bill would also have colleges and universities institute a policy concerning standards and practices for collecting institutional debt and report information concerning how much debt each institution holds.

Assemblymember Blanca Pacheco, D- Los Angeles, introduced the legislation.

"California already has taken the first step towards addressing institutional debt by prohibiting transcript withholding as a means to collect on institutional debt, but with this growth of institutional debt, more needs to be done," Alina Evans, communications director for Pacheco, said in a statement to BestColleges.

"AB 1160 builds off current statute to provide increased consumer protections for students, which in turn helps with the state's overall enrollment and graduation rates."

The California State Student Association, University of California Student Association, Student Senate for California Community Colleges, and Student Debt Crisis Center, among others, support the legislation.

When Pacheco first introduced the bill, it was opposed by several groups, including the California State University system, a handful of private independent colleges, the Association of Independent California Colleges and Universities (AICCU), and debt collector associations.

However, Evans said Pacheco and cosponsors of the legislation "found common ground" during the interim recess, and amendments to the bill have been submitted.

"We expect to continue to talk with CSU, AICCU, and other various colleges to ensure the bill reaches its goals to benefit both students and colleges," she said.

The bill passed the California Assembly by a vote of 61-8 and is headed to the Senate.