The student user credentials are not stored if the institution has installed the Blackboard Sync Building Block; they are only used once to initiate the single sign-on.
Without the Blackboard Sync Building Block, storing the user credentials is necessary to enable Blackboard Sync to sync the user's content from Blackboard Learn. The credentials are encrypted when stored in the Blackboard Sync central service and are also encrypted when being passed over the Internet to authenticate the student. The Blackboard Sync central service is hosted by Blackboard's Managed Hosting team in the same secure, high availability environment used to host Blackboard products for over 500 institutions.