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Misguided Payment Policies Rising College Dropout Rates

The decision is business as usual vs. serving the greater good.

Students who have outstanding balances that prevent them from finishing college are often short just a few dollars and a couple of credits.

Even unpaid library fines and balances on campus cards can trigger a windfall of consequences that push thousands of students into debt and degree-less purgatory every year.

Amid an increased focus on these students, the University Innovation Alliance recently announced a round of so-called completion grants for students from low-income backgrounds who are close to graduating. This group of 11 large public universities says individual payment shortfalls of $1,000 or less put 4,000 of its Pell-eligible seniors at risk of dropping out. The Alliance says it drew its inspiration from the Panther Retention Grants program that Georgia State University started in 2011, when 1,000 students were dropping out every semester because of unpaid tuition of less than $1,500 each. Georgia State says the program has helped 8,000 students since 2011. (Funders for the UIA completion grants include the Bill & Melinda Gates Foundation, which is also a funder of The Hechinger Report.)

While they are certainly helpful, these grants are not enough; they tackle a symptom without solving the underlying problem.

That problem is the failed leverage and collections policies that disproportionately inhibit low-income students from finishing college, transferring their credits and re-enrolling after stopping out.

Until colleges and universities are willing to rethink these policies, they will perpetuate cycles of poverty for affected students.

Colleges function as both businesses with private financial interests and institutions with a shared public mission. As surely as colleges will increase tuition to cover operational costs and give more aid to support students, these natures are always in competition.

In the current higher education landscape — one where disinvestment and falling enrollment is driving colleges to compete with their peers in new and increasingly controversial ways — institutions are under more pressure than ever to prioritize business over student success. And while they’re pushing for new, innovative solutions to old problems, they may be paying less attention to how some of their most problematic policies ensure their bottom lines at the cost of student success.

Colleges go to great lengths to collect on what they are owed and protect themselves from potential loss of revenue. Some collection policies, like sending outstanding student account balances to collection agencies, are encouraged or facilitated by state law. Others are common institutional practices, like that of holding transcripts hostage as leverage.

Together, these policies can lock students from low-income backgrounds in college debt purgatory. Consider the example of a student from a low-income family whose parent becomes sick, forcing him to divert tuition money home and leaving him with an outstanding account balance.

That student might be barred from registering for courses until the balance is paid down. Worse, he might also be denied access to his transcript, which means now he can’t transfer his earned credits to a cheaper institution to finish his degree program.

Without a credential, this student winds up locked into low-paying jobs to repay the loans he took on to finance a degree he now can’t earn and his outstanding balance, on top of his usual living costs.

If the student wants to return to school, he’ll have to prioritize repaying those federal and institutional loans. Defaulting on either could lead to the original college refusing to re-enroll the student. He could enroll in an income-driven repayment plan for his federal loans, a complicated enough pursuit on its own; the college could still pass his outstanding balance to a collection agency in the meantime, damaging his credit and further diminishing his prospects for returning to school.

Even if the student managed to do everything right and put money toward his outstanding balance each month, he’d need to pay it off in short order. That’s because it’s common practice for colleges to delete student records and the student’s earned credits after a certain amount of time.

And to what end? Blocking students from registering for courses and re-enrolling means potentially blocking revenue, and students who don’t finish their degrees are more than three times as likely to default on their loans, which (in large numbers) can put the colleges they attended at risk of losing access to federal student aid. And how many colleges are paying for administrators and programs solely dedicated to increasing retention with one possible solution right in front of them? Colleges should reevaluate collections policies their consequences for themselves as well as students.

When colleges prioritize their financial interests over their public mission, everyone loses. Completion grants are a necessary step towards righting the ship, but putting student success first will require colleges to own up to the idea that they have even more control over the financial circumstances and status of their students than their actions suggest.

This story was produced by The Hechinger Report, a nonprofit, independent news organization focused on inequality and innovation in education. Sign up for our newsletter.

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