State Student Loan Programs.
Washington had two laws granting the state the authority to develop student loan programs. In 2007 the Washington Higher Education Facilities Authority (WHEFA) was granted permission to issue taxable and tax-exempt bonds to acquire or originate student loans. The law prohibits the state from guaranteeing the loans. However, the WHEFA never used the authority because the auction-rate security market in which student loan bonds were issued ended in 2007. In addition, in 2010 the federal government changed the Stafford Loan program to the Direct Loan program, and the federal government began administering the loans itself rather than using a private entity. Without a state guarantee or a significant reserve fund, the WHEFA found that the interest rate on the state student loans would not be competitive with the federal Direct Loan program.
In 2009 the Higher Education Loan Program (HELP) was created to issue low-interest educational loans and was to be administered by the Washington Student Achievement Council (WSAC). However, the program was never funded, and it was repealed in 2019.
The state has established and funded smaller loan programs for specific fields. For example, the WSAC administers the Aerospace Training Student Loan Program and provides student loan repayment under the Washington Health Corps. The state also administers a variety of conditional scholarship programs in which the scholarships are turned into loans if the student fails to complete a required service obligation.
The Washington Student Loan Program is created. The Washington Student Achievement Council (WSAC) must administer the program and has a variety of administrative duties, including but not limited to:
The WSAC must award student loans beginning with the 2024-25 academic year. Student loans issued under the program must have the following characteristics:
To qualify for a loan issued under the program, a student must be a resident, have a family income at or below the state median family income, be enrolled on at least a half-time basis at an institution of higher education, and complete a financial aid application. All undergraduate students who meet the requirements are eligible, but graduate students need to be enrolled in a specialized field of study that has a workforce shortage or is considered high-demand, as determined by the WSAC. The WSAC must also ensure that institutions of higher education have a policy for prioritizing student loans for eligible students who have greater unmet financial need, are lowest income, are first generation college students, and who have received loans under the program in prior years.
For undergraduate students, the annual loan limit is $3,000 and the maximum total loan limit is $12,000. For graduate students, the annual loan limit is $5,000 and the maximum total loan limit is $10,000. A borrower may receive loans as both an undergraduate student and a graduate student.
The WSAC must establish two repayment options for borrowers and establish which is the default repayment method: (1) a standard repayment plan of 10 years; and (2) an income-based repayment plan. The income-based repayment plan may require monthly payments of no more than 10 percent of a borrower's discretionary income over a repayment period of no more than 20 years. After the repayment period of 20 years, the WSAC shall forgive any remaining balance.
The WSAC must contract with one or more state-based financial institutions regulated under either the Washington State Credit Union Act or the Washington Commercial Bank Act for loan origination and may contract with a third-party for loan servicing. A third-party entity providing loan servicing must comply with the requirements of student loan servicers under the Consumer Loan Act.
The WSAC must collect data on the program in collaboration with institutions of higher education and submit an annual report to the Legislature beginning December 1, 2026. The data WSAC must collect includes:
The Washington Student Loan Account (account) is created in the custody of the State Treasurer. Loan origination is capped at $34 million per year, of which no more than 20 percent is allowed for graduate student loans. Program funds are permitted to be held in the Treasurer's Trust Fund and must receive its proportionate share of earnings.
The Senate amendment removes the establishment of a state student loan program and instead requires the Washington Student Achievement Council (WSAC), in consultation with the Office of the State Treasurer and the State Investment Board to design a student loan program and make recommendations on the program’s features and an implementation plan. The implementation plan must include recommendations on a low interest rate that is below the current federal subsidized interest rate for student loans, the distribution of loans between undergraduate and graduate students, the loan terms, repayment options, the types and characteristics of borrowers permitted to participate in the program, and an appeals process. In addition, the plan may include recommendations for contracting with one or more state-based financial institutions to provide loan origination and contracting with a third-party entity for loan servicing. The implementation plan must also include an analysis on the sustainability of the program. The WSAC must submit a report on the design and implementation plan for the state student loan program to the Governor and the Legislature by December 1, 2022.
(In support) Washington continues to rank among the top 10 states for low student loan debt and low default rates at the public institutions of higher education. Washington already has great financial aid programs, but students often have to take out loans with interest rates that range anywhere from 3 to 15 percent. Student loans are a necessary part of a student's financial aid package as costs continue to rise, but loans are not ideal. Since students will continue to use loans, especially low-income students, loans with lower interest rates are better. This program would provide 1 percent interest rate student loans. It is much appreciated that graduate students are included in the program. Graduate students account for 15 percent of students, but carry 40 percent of the student loan debt. Low interest loans are a fantastic starting point while the state works towards debt- free options. This program works in conjunction with expanding the Washington College Grant program, and the state must view this program as a package with other financial aid, particularly wraparound services that help keep students enrolled in college. Resources need to be made available for students who might otherwise drop out.
(Opposed) None.
(In support) Financial aid and family support are often not enough to cover all of the costs of higher education. There have been significant increases in all costs associated with higher education. It is not just about paying for tuition. Graduating without significant debt is a tremendous feat that causes many students to work extra jobs and spend significant time searching for scholarships and grants. Those who cannot afford the costs often turn to private loans, which can be predatory. Students may not understand the implications of taking out student loans with high interest rates. Debt accrual encourages high dropout rates, mental health crises, disproportionately impacts students of color, and low-income students are more susceptible to inequitable payback rates. Postsecondary education is essential for the achievement, advancement, and betterment of the political, social, and economic opportunities.
Despite only accounting for 15 percent of enrolled students, graduate borrowers hold 40 percent of student loan debt. Graduate degrees are increasingly important for the state's workforce, but it is hard to attain advanced degrees without crippling debt. This program acknowledges an investment in graduate students that could be a model for the state.
(Opposed) None.
(Other) The low-interest student loan would help many students, including those attending private institutions. All students from low-income families should have access to financial aid resources. Nonprofit private institutions offer many excellent programs and confer one in five baccalaureate degrees in the state. An amendment is requested to allow students attending private institutions to be eligible for the program.