Attention to the burden of U.S. educational debt, now at $1.7 trillion, has grown in recent years.[1] For too many former postsecondary students—especially Black students—debt they took on to improve their lives and career prospects has instead become a financial hindrance, delaying or undermining their efforts to buy homes, build savings, or provide for their families.[2] The debt burden is especially severe for those who never completed their postsecondary program and therefore did not receive the credentials that might have boosted their careers and incomes enough to justify taking on the debt.

Millions of these former students with some college and no credential are subject to a particularly insidious but under-studied form of educational debt. They have what we call “stranded credits,” or academic credits they earned but cannot access because they have an unpaid balance with a previously attended institution that is holding their transcript as collateral. While many institutions view a transcript hold as the most effective way to collect on these outstanding balances, the practice creates an obstacle and a paradox for students who need the transcript to continue their education or obtain a job that will help them pay off that and other educational debt.

In this paper we provide the first deep exploration of the problem of stranded credits. Our national estimates suggest there could be as much as $15 billion in unpaid balances to colleges and universities, and roughly 6.6 million students may have stranded credits. Adult learners, lower-income students, and racial and ethnic minority students are the most likely to owe outstanding balances to previously attended institutions, and therefore most likely to have stranded credits. Survey data suggest that the practice of withholding transcripts is widespread, with nearly 100 percent of institutions indicating that they withhold transcripts for one or more reasons. Many withhold transcripts for relatively small unpaid balances.