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If you owe the debt to the school, and the school's policy is that they don't release transcripts without settling the debt you've got two options - do without the transcripts, or work with the school and settle the debt. If they haven't sent the amount to a collection agency, then they clearly aren't all that worried about getting the full amount. I would get back in touch with the school (hopefully with this person who understands what happened) and explain that you want to settle this situation, but you don't feel like you were complicit in the situation. Hopefully a little pushing in that direction will result in an offer that you can live with.
Otherwise, do you absolutely have to have the transcripts? Depending on what courses you took, getting the transfer credit may not be worth the time or energy...