Ohio’s penalizing student debt collection a ‘barrier to students,’ advocates say

The debt owed to the state of Ohio through defaulted payments like student loans is nearly 12 times the amount the state invests in higher education over a two-year budget cycle.

That $63 billion, confirmed by the collection agency for the state — the Ohio Attorney General’s Office, includes things other than student loan debt, collected from more than 1,600 public entities like courts and municipalities.

But an inventory of university loan accounts shows more than 363,000 non-federal loan accounts (the accounts the AG’s office pursues if a loan goes unpaid) open in the state. Combined with federal loans, that amounts to a total of $745.8 million in loans taken out by public university students.

Ohio law requires that state institutions of higher education certify their outstanding debt to the AG’s office for collection 45 days after the amount is due or within 10 days after the start of the next academic session, whichever is later, according to the Ohio Department of Higher Education.

As of fiscal year 2020, certified debt sitting with the AG’s office totaled $48 million, not including owed interest, down from $62 million the previous fiscal year.

Collecting that debt ultimately comes down to the Attorney General’s office, but it says $63 billion is too much for one agency to resolve.

“Because of the sheer size of the debt owed to Ohio…and the number of debtors, the Attorney General’s Office employs third-party debt collectors and law firms to help recover the money,” a spokesperson for the office stated.

A ‘barrier for students’

It’s the third-party debt collectors’ compounding fees along with the certification process itself that critics say keeps students, especially low-income and minority populations, from reaping the rewards of their education instead of drowning in debt.

A study done last year by the think-tank Policy Matters Ohio found the debts, combined with varying late fees and fines from the individual schools themselves and a collections commission rate of 10%, saddle students with even more to pay back, along with the potential punishment of transcript withholding and registration bans.

“These policies can permanently end students’ educational aspirations and trap them in a cycle of low-wage jobs,” the study stated. “The individuals themselves clearly suffer, but so do the economies of Ohio’s communities and the state as a whole.”

Ohio is one of only five states in the nation that refer institutional debt to the AG’s office, according to data conducted by public policy consulting firm HCM Strategists.

While Ohio law says the AG’s office can extend the payment time for overdue fees by agreeing to a payment plan, the state agency can also “add fees to recover the cost of processing checks or other draft instruments returned for insufficient funds and the cost of providing electronic payment options,” above the 10% commission fee and other fees related to attempting to collect the debt through legal means.

If the debt stays unpaid and nothing is done to cancel the claim, the claim can sit on the books for up to 40 years.

A student loan debt advisory group put together by now-Ohio Gov. Mike DeWine and conducted through the AG’s office in 2017 (during then-AG DeWine’s tenure) criticized the agency’s own debt certification process, because colleges and universities “certify their outstanding debt pursuant to varying policies and practices.”

“To ensure that all Ohio students are treated fairly and uniformly, the Student Loan Debt Advisory Group members believe that colleges and universities should adopt uniform certification practices that emphasize transparency for both debtors and the AGO,” the group stated in the report.

It appears those policy recommendations haven’t been implemented, as a 2019 annual report on affordability and efficiency from the Ohio Department of Higher Education once again recommended the practice be improved, citing the recommendations of the advisory group.

Costs of a higher education

While some public colleges and universities implement a “tuition guarantee” for incoming students, which allows the student to pay a fixed amount throughout the four-years they attend the institution, the cost of going to college has continued to increase overall in the state.

The average tuition and mandatory fees for university main campuses in the state for fiscal year 2021 is $10,076 per year, according to a summary of costs provided by the Ohio Department of Higher Education. That average is a 1.3% increase from FY 2020, when the average was $9,950 per year, which was a slight jump from $9,817 per year the year before, according to state data.

For the fiscal year 2021, the highest main campus tuition and fees are charged at Miami University ($14,839), followed by Bowling Green State University ($11,179), the University of Cincinnati ($11,000), and Ohio University ($10,810).

Community colleges in the state saw an average for tuition and fees of $5,023 for FY 2021, up 1.9% from the previous year. Owens State Community College ranked highest in annual tuition and fees for the year, at $6,224, a 2.3% increase from their rates in 2020.

Eastern Gateway Community College was second highest in annual tuition and fees, at $5,610, followed by Northwest State Community College ($5,575), Stark State College of Technology ($5,458) and James A. Rhodes State College ($5,412).

Transcript withholding

Advocates fighting against student debt collection methods say changes also need to be made to school-level punishments, including withholding a transcript for unpaid debts. When a transcript is withheld, students can’t enroll in classes until the debt is paid, and those that have been sent to the AG’s office are even harder to untangle.

“The importance of access to transcripts cannot be overstated, as individuals’ plans to continue their educations can be effectively halted, as can their access to higher-paying jobs that may require official transcripts,” Policy Matters stated in their study of student debt.

The issue came up in discussions about the biennial state budget, set to be approved this summer by the Ohio legislature. Department of Higher Education Chancellor Randy Gardner set aside time in his testimony before the subcommittee currently looking at the state’s operating budget specifically to talk about transcripts.

“This is not a subject without at least some room for debate, discussion and perhaps some controversy,” Gardner said.

The proposed budget, Gardner said, tasks the chancellor with establishing a policy regarding college and university transcript withholding, something he said almost every state in the nation employs to “provide at least leverage for debts owed to the campus.”

Gardner said he does not believe in a unilateral approach to higher education, and that the state’s system is better when it relies on boards of trustees and administrators from each campus.

The state higher ed agency began talking with education leaders about transcript withholding last week, according to the chancellor, “looking at ways we can encourage re-entry.” He said with hundreds of thousands of Ohioans subject to collection, transcripts will be a “real key issue” as the budget moves forward.

“I believe we need to find a way to reduce those numbers, to find ways to mitigate those debts,” Gardner said. “But also respecting that the debt is still owed to an institution, and that I don’t believe state government should tell an institution that it should forgo a debt that is owed to that institution.”

Changes to the process

The 2019 report from the state department of higher ed’s efficiency advisory committee said financial literacy classes should be commonplace at colleges and universities, not just for students but also parents at summer orientation, “emphasizing the differences between grants and student loans.”

In the same year as the state report, the U.S. Department of Education released guidance asking that monetary assistance be referred to by the type of assistance given.

“The guidance calls for not describing loans as ‘awards,’ including the total cost of attendance in letters, breaking costs down into clear components, avoiding co-mingling grants, scholarships, loans and work-study together, and always including a net cost calculation in financial aid letters,” according to the guidance, cited by the state higher ed agency.

One of the recommendations of the Policy Matters study was to increase the state share of instruction to colleges and universities — the state’s biggest source of aid to higher education — and increase the Ohio College Opportunity Grant (OCOG) program. DeWine’s executive budget proposal, currently under review by the Ohio legislature, includes increases to both of those areas.

Student loan forgiveness doesn’t appear to be on the horizon on the federal side, however. Last week, President Joe Biden said he wouldn’t cancel $50,000 in student loans, instead leaning toward $10,000 forgiveness, done through Congressional action, not through an executive order.

Student loan payments on federal-owned loans were suspended due to the pandemic starting nearly a year ago, but it’s unclear whether that will be extended passed its current deadline of Sep. 30.