State law requiring Ohio’s public colleges and universities to send student debt to the Ohio Attorney General’s office for collection hits students with onerous fees and exorbitant interest rates on top of amounts they owe, a new Policy Matters Ohio report shows. Because schools withhold transcripts from students who owe them money, the state’s approach to student-debt collection can end students’ educational aspirations and trap them in lower-wage jobs.

Data show that Ohio policy disproportionately harms students at community colleges and the state’s only public historically Black university, Central State University. These students are more likely to be people of color or first-generation students, and to come from low-income families.

“Ohio policymakers set an official goal that 65% of our adult population will have a college degree, certificate or credential by 2025,” said Julie Szeltner, senior director of adult programs and services at College Now Greater Cleveland. “That’s not going to happen if policies and practices drive students into debt that makes them unable to obtain a degree, especially students who are the first in their family to attend college.”

Student debt certified to the Attorney General’s Office (AGO) includes unpaid tuition as well as fines for non-payment, parking fines, library and lab fees, and other fees not directly related to tuition. Most schools withhold transcripts from students with outstanding balances, inhibiting students’ ability to pursue further education and hurting their career aspirations.

The AGO generally charges 10% interest and pays debt collectors 21% on a contingency basis; lawyers hired by the AGO to collect debt charge up to 33%. State law allows the AGO to add collection fees on top of debt owed, which can saddle students with even more to pay back.

“Because of the punitive way the Ohio Attorney General’s office collects student debt, small debts balloon and make it impossible for students to re-enroll,” report author Piet van Lier said. “The impact on students of color and those from low-income families makes a system that’s already stacked against them even harder to overcome.”

Ohio’s community colleges have nearly twice the debt accounts per student (1.58) as the state’s four-year colleges (.84). Fifteen percent of Ohio community college students are Black and 34% are first-generation students, compared to 9% and 19% at four-year schools, respectively. However, three four-year institutions stand out. The University of Toledo, Shawnee State University and Central State University have 1.83, 1.47 and 1.4 accounts per student with an average account value of $1,801, $3,030 and $4,469 respectively. Each of these institutions has a higher than average share of first-generation students, especially Central State, where 46% of the student body are the first members of their families to attend college.

Among the report’s recommendations to better protect students, Policy Matters calls on legislators to stop requiring schools to send debt to the AGO for collection. Instead, they should incentivize schools to focus on debt-forgiveness, individual support, re-enrollment and degree completion. Lawmakers also can eliminate fees and penalties related to student debt and ban transcript withholding.