Over the past year, VPM News has been looking into a hidden type of debt affecting thousands of Virginia college students. It’s not federal student loans, which dominates most of the headlines. It’s money owed directly to institutions, called direct-to-school debt.
In our series Dreams Deferred, we’ve been exploring how this is creating hardships for students, making it difficult for them to complete their degrees and advance their careers. Today we’re unpacking some solutions that schools in other states have put in place to help students with direct-to-school debt go back to school.
To start this series from the beginning, click here.
In 2016, Ashley Ramirez created a prayer closet. She started writing down her goals on sticky notes and posting them inside her bedroom closet. She’d make time to go in and pray for her goals every morning.
“I have a lash extension company and a salon,” Ramirez said. “I had a client and she was telling me you really should start a prayer closet. Writing things down is really, really powerful.”
One of her biggest goals: finishing her college degree. She’d started college at Wayne State University in Detroit a decade prior, but had gotten overwhelmed. Not only was she taking classes there, but she was also in barber school and working – all at the same time.
“It was honestly too much to juggle between all three,” Ramirez said. “So I ended up dropping some courses. And then every semester when I dropped courses, I felt so bad that I would try to take even more courses the next semester, but then I ended up dropping them again. So it was just a vicious cycle of me taking on more than what I could take.”
Ramirez ended up on academic probation and says it was never clear if – and how – she’d ever become eligible to reenroll at Wayne State. When she saw something on the news about a new program the school had launched to help students like her who hadn’t finished their degrees, called Warrior Way Back, Ramirez was skeptical at first.
“And my mom, she saw it. And she was like, Ashley, you really, really need to go down there,” Ramirez said. “So I'm like, okay, I canceled a couple of clients, and I ended up going down there. The line was huge. And I waited in line. And that's when I found out that I only owed $300.”
Ramirez was surprised. She thought she owed a lot more to the university. Through the new program, she was able to get reenrolled in classes. She also got access to other university resources, like academic advising and counseling. And her debt was wiped out. The school forgives up to $1,500 in unpaid direct-to-school debt, typically over the course of three semesters.
“We literally just set that debt amount kind of in a parking lot,” said Dawn Medley, former associate vice president of enrollment management for Wayne State. “And every term that you're enrolled, we erase a third of it.”
If they owe more than $1,500, students can pay down the debt to qualify as long as they meet all of the other program criteria. And if students don’t need three semesters’ worth of credits in order to graduate, the debt can be forgiven earlier. That’s something Medley said Wayne State learned during the first semester of the program.
“We had some students who came back to us that first semester, and they did everything they needed to graduate. And so maybe they owed us $1,200,” Medley said. “Well, we weren't going to make them enroll for two more terms to clear that debt. We just weren't. So we just took care of that. And we just wiped that debt out, because it was the right thing for us to do.”
Malik Wilson says he first enrolled at Wayne State University in 1994. But life happened: He got a good job, his daughter was born, and he had house and car payments. At the time he couldn’t afford to stop working in order to go back to school.
“I said, ‘Oh, I'll go back. I'll go back next year, I’ll go back,’” Malik Wilson said. “I just stopped for a minute, you know. You just keep putting it off.”
Over 20 years later, Wilson saw something pop up on Facebook advertising the Warrior Way Back program. As he recalls, his balance was just under $1,500.
“When they said hey, we'll forgive any student debt under $1,500, you can come back now...I said ‘Oh, that sounds like me,’” Wilson said. “Let me check that out. And sure enough, it was like $1,400.”
Wilson graduated from Wayne State University last year, and says he’s now working on his master’s degree in acquisitions and administration from Central Michigan University. He plans to go to law school, following in his father’s footsteps.
Challenging the status quo of higher education policy
Medley came up with the idea for the Warrior Way Back program as part of work with the Lumina Talent Hub to reengage adult students who had attended college but not graduated. It was also part of a statewide goal of getting to 60% post-secondary degree certificate achievement for adult learners by 2030.
After researching barriers that stopped adult learners from completing their degrees, Medley found direct-to-school debt was a common denominator.
“We had about 13,000 students that had left our institution, and probably about half of those had past-due debt,” Medley said.
Since launching in 2018, Warrior Way Back has enrolled over 260 students. The average age of students participating is 39, although students as old as 63 and as young as 23 have participated. According to Wayne State, 75% of students have been Black, and over 50% have been identified as high-need.
Medley drew inspiration for the program from public libraries forgiving past-due fines and fees, and cities forgiving parking and impoundment fines. She couldn’t believe nobody had challenged what has long been considered standard financial practice in higher education for years.
“In higher ed, you can be current every single semester,” Medley said. “And if you fall behind that last semester, and owe a past-due debt, they hold your entire educational experience out of your reach, and you can't take that and then go to a different institution.”
Medley said she was only able to convince Wayne State to establish the program because it made financial sense to the university. Warrior Way Back is not set up purely as a debt forgiveness program. Students have to reenroll in future semesters and sign up to pay tuition. Then, the past-due debt they owed is treated as a sort of scholarship, or tuition discount.
Medley is not an accountant. She calls it English-major math.
“So you look at essentially what revenue you plan to generate from tuition and fees, and you deduct the amount of debt that you are forgiving,” Medley said. “And you also deduct any fees that you had to pay to buy that debt back from the collection agency. And that's pretty much it.”
That calculation is the school’s return on investment. In January, Medley said the program had generated over $1 million in positive net tuition revenue for Wayne State. Now, she says revenue is close to $2 million.
Once a student is accepted into the program, Wayne State purchases the debt back from outside collection agencies so that the university owns the debt again.
“That's incredibly important, because as soon as it comes back to the institution, it goes off of the student’s credit report, and it's no longer a negative,” Medley said.
Just because the debt comes back to the institution doesn’t mean students’ credit scores will increase immediately. Credit reporting agencies can keep this debt on their books for up to seven years. But Medley says that ultimately, having a better credit score can be transformational, changing where students can work since some employers check credit scores as part of the hiring process.
Medley said the program also changed the perception of schools in some students’ minds.
“We have seen a lot of students who've paid down their debt to get eligible for this program, which is interesting because they weren't talking to us before,” Medley said. “We were a debt collector, we were not an educational partner.”
Warrior Way Back also signaled to students like Ashley Ramirez that the school wanted to help them finish their degrees and that it’s not just about the money.
“I would’ve eventually decided to go back [to college.] But would I have been able to go back? I don’t know,” Ramirez said. “What I do know is that the Warrior Way Back program opened up access. And when I say access, I mean the ability to be able to have a dialogue to figure out where I am and what I can do to actually finish this goal.”
Not only did Ramirez finish her bachelor’s degree at Wayne State in May, she’s now in an MBA program there and is working as an entrepreneur, building a co-working space for smaller salon owners.
Ashley Ramirez celebrating after graduating from Wayne
“And that's not even something that was on my prayer list,” Ramirez said. “It probably was something that was in my heart. And it's been in my heart. But I didn't know that I had the wherewithal within myself to be able to get to this point."
Other schools model Wayne State’s approach
The Warrior Way Back program has inspired schools and organizations in other states.
Leanne Davis, associate director of research and policy for the Institute for Higher Education Policy, researched the program and wrote about it. She also created an online calculator tool to help other institutions use the same calculation Wayne State used in starting their debt forgiveness program.
“To build the calculator, we based it off of the idea of a mortgage calculator, and that you want to go online and you want to be able to manipulate this tool and see the range of possibilities,” Davis said. “The user can download the calculations, they can print it out so that they can take it to a meeting at their institution and share.”
Not only does it make financial sense to many schools, Davis said, but it takes a holistic approach to ensuring students are set up to succeed from the start.
“It wasn't just a program that was focused on forgiving this debt and getting students back into the institution,” Davis said. “They were able to provide other types of supports that the students really needed in order to be successful, to ensure that they stayed enrolled, that they're able to complete their degrees and that they're really completing credentials of value.”
For example, students meet with an advisor at least twice a semester. And they have access to mentorship and other support, like optional training sessions on study skills.
“I had such good mentorship along the way,” said Kamara Gill, who plans to graduate from Wayne State University in December with a degree in psychology. “Without that mentorship, I don't think I would have been able to continue. That was key, to have a good support system. And then to create good study skills, good organizational skills.”
Gill initially had to drop out of college several years ago after her son was diagnosed with autism and she had to start paying for him to attend a new school. Gill says at the time she couldn’t afford to pay for both her son’s school and her own. The Warrior Way Back program has allowed her to prioritize her own education again.
“My car is probably 20 years old and I'm going to keep it running because my money goes towards his education and that's what matters to me. I went ahead and put a certain amount of money towards finishing my degree, however, he's my first priority,” Gill said. “I am still paying for my son’s school. I don't think I will ever stop paying for his school until he's ready to be out on his own because that is just the sacrifice that I'm going to continuously have to make.”
Davis said the Warrior Way Back program was showcased to universities and organizations in other states as part of a Lumina Talent Hub event, who then wanted to see how they could replicate it.
The Missouri Scholarship and Loan Foundation started the Finish Line Degree Completion Grant program in fall 2019. They provide grants of up to $3,000 to wipe out past-due balances for students with direct-to-school debt from over 50 Missouri colleges. Qualifying students can either reenroll in classes to finish their degrees or just access their transcripts or diplomas.
“Dawn [Medley] informed our thinking as we created the program and was able to come to the launch of our program and speak to universities about how to assist students with back balances and to increase their enrollment,” Melissa Findley, executive director of the Missouri Scholarship and Loan Program, told VPM News. “We knew we needed to do something to better support students who wanted to complete their degree but the back balance prevented reenrollment.”
Universities spread awareness of the grant, and students apply directly through the foundation. Since ramping up in early 2020, the program has provided over $260,000 to more than 200 students. Findley said the average amount awarded is $1,225. The average age of the debt is about 3 years.
At first, Findley said the foundation required universities to provide a match. But they’ve since dropped that requirement. Some Missouri schools receiving the grant funds have been able to forgive even more than the $3,000, like Drury University in Springfield, which has been forgiving an additional $1,000 in some cases.
“Most of the students that have received this grant are adults. They have families and other commitments in their life, and they're trying to return to school,” said Becky Ahrens, executive director of financial aid at Drury University. “They want to complete their degree, but for many of them, life happened. And they had to step away from their college experience to tend to other areas of their life.”
Schools like Cleveland State University used federal COVID-19 relief funds to forgive some direct-to-school student debt. Leanne Davis said the school had already piloted a debt forgiveness program prior to the pandemic, which helped earn buy-in about its effectiveness.
“So they already had evidence showing that they were able to forgive debt, invite students back, and that they were able to earn more revenue,” Davis said. “So when the higher education emergency relief funding was made available, for institutions to be able to use part of that to forgive past-due balances for students who might have stopped out due to the COVID-19 pandemic, they were able to target that funding and they already had the institutional will to use their funding in that way.”
Other schools across the country, including two historically Black colleges and universities near Richmond, Virginia — Virginia State University and Virginia Union University — have also used COVID-19 relief funds to wipe out certain direct-to-school student debts. VSU said in a July 2021 statement that the relief will apply to students enrolled in spring, summer, fall, and winter 2020 classes as well as spring 2021 semesters.
“We care about our students and their academic success and want to provide them the privilege of moving forward with a zero balance,” Donald Palm, provost and vice president for academic affairs, said in the announcement. “We believe that relieving them from these balances will provide much-needed relief that will allow our scholars to focus more intently on their academics and degree completion.”
In a Sept. 14 interview with VPM News, Kevin Davenport, vice president for finance at Virginia State University, said he thought Wayne State’s model makes sense and said “we would consider it.”
All other four-year colleges in Virginia did not directly respond to a question about this as part of a survey VPM News sent as part of the reporting process of this series.
VCU wrote, “we wouldn’t speculate on changes to state law,” and JMU wrote, “it is difficult to speculate on hypothetical changes to the law.”
William & Mary wrote, “As a public university in Virginia, William & Mary’s debt collection policies are governed by Virginia Law and we adhere to them.”A spokesperson for Old Dominion University, Giovanna Genard, wrote in an email statement that “these questions ask the University to comment on either the intent or wisdom of the law. As an agency of the Commonwealth, Old Dominion follows state law and does not question the public policy expressed by the General Assembly in the passage of those laws.”
It’s possible that state regulations would have to change before Virginia universities would be allowed to even set up a program like Warrior Way Back. The reason Wayne State University requires previously-enrolled students to have been out of school for at least two years before becoming eligible for the program is because that’s when the school writes off bad debt, so it no longer impacts the financial standing of the institution.
“And so it no longer bounces against our balance sheet,” Medley said. “And so for some folks, they write it off after a year, some folks hang on to it for five years.”
Virginia guidelines don’t specify a timeline for when colleges can write off uncollected debts. In fact, regulations state they should only be written off “when all collection procedures, including those required by the [Office of the Attorney General], have been conducted without results and management deems the accounts uncollectible.” The regulations also specify that even when written off, “collection procedures should continue” because “the debt is still owed to the Commonwealth.”
California leads country as first state to prohibit transcript withholding
In 2019, California became the first state in the U.S. to pass legislation banning the practice of university transcript withholding as a form of debt collection. Washington state has since followed suit, and advocates in New York and other states are trying to get similar legislation passed.
California’s legislation “prohibits any public or private postsecondary school from withholding a transcript for a current or former student on the grounds that the student owes debt.” Its passage was spearheaded by the state attorney general’s office under the advice of Eleanor Blume, special assistant attorney general and economic advisor to the attorney general. The office had noticed that transcript withholding was a common practice among some exploitative for-profit colleges.
“And this is exactly the kind of thing that has particular harm on those with the least financial resilience,” Blume told VPM News in fall 2020. “Because it is saying, if you can't pay your bill to us for something that you knew you owed, or you didn't know you owed, regardless, if you can't pay your bill, you can't apply for that job, or you can't apply for further education. And so you can't get additional income to pay. So it has a particularly pernicious effect on people with fewer financial resources and a particularly pernicious effect on communities of color that are disproportionately harmed by these sorts of practices.”
California’s Office of the Attorney General is not involved in the collection of state debts, according to Blume. Despite limited national data, one recent national study found that only five states, including Virginia, have specific legislative mandates referring public university debt to their attorney general’s office for collection.
After reports from New York and Ohio surfaced showing involvement from their attorneys general in student debt collection, advocacy and policy groups have called for changes, some even questioning the role of the AG in student debt collection.
“Ohio lawmakers should get the AG out of the business of collecting students’ debt and allow schools to manage it on their own,” wrote Piet van Lier, a researcher with Policy Matters Ohio, in the Ohio Capital Journal.
A 2020 report from Policy Matters Ohio found that Ohio’s attorney general has collected on average $50 million per year, totaling about seven cents on the dollar and representing barely a fraction of 1% of the schools’ budgets.
“In other words, the harsh practice of withholding transcripts results in fairly meager revenue for schools,” stated a February 2021 report from the Student Borrower Protection Center, referencing the Ohio figures. “It is not worth it to put students and borrowers in untenable positions in the first place; it is even less justifiable when schools are recouping very little money.”
Still, many universities are pushing back on efforts to ban transcript withholding. The Association of Independent California Colleges and Universities submitted a letter in opposition to California’s legislation to prohibit transcript withholding stating that "in the absence of the ability to withhold transcripts, the only remaining enforcement mechanism would be to refer these debts to collections agencies.”
According to another recent national report, “it appears that institutions are hesitant to relinquish this tool for debt collection.” A 2020 survey from the American Association of Collegiate Registrars and Admissions Officers found 95% of college respondents indicated they still withhold transcripts for one or more reasons.
The Student Borrower Protection Center has called on the federal government to make wiping out institutional student debts a requirement in order for universities to receive future COVID-19 stimulus dollars. The report also calls on the federal government to follow California and permanently ban transcript withholding at the federal level.
At the very least, the SBPC say policymakers must temporarily ban transcript withholding and halt all collections actions for the duration of the pandemic. There hasn’t been a legislative push in Virginia to adopt the reforms of other states, but this federal initiative may put new pressure on lawmakers and college administrators.
This is the 4th and final installment in a 4-part special series, Dreams Deferred. Click hereto read part 1, hereto read part 2, and here to read pt. 3.
Read about how we reported this series.
Reporting for this series was made possible through a ProPublica Local Reporting Network fellowship VPM News reporter Megan Pauly received in fall 2020.
Dreams Deferred was reported by VPM’s Megan Pauly with editorial guidance and production support from VPM's Sara McCloskey, David Streever, Connor Scribner, Elliott Robinson, Travis Pope and Ben Dolle.
Additional support was provided by independent contractors Johanna Zorn (editor) and Amy Tardiff (fact-checker). Special thanks to: ProPublica’s Alex Mierjeski, Maya Miller, Beena Raghavendran and Annie Waldman.
