BP BHEAD INT S

AN ACT Relating to expanding access to higher education; amending RCW 28B.10.808; and adding new sections to chapter 28B.10 RCW.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. A new section is added to chapter 28B.10 RCW to read as follows:

(1) Seventy percent of the state-appropriated funds for the state financial aid program, other than those for the college work-study program established under chapter 28B.12 RCW and programs under chapters 28B.101, 28B.102, 28B.104, 28B.107, and 28B.108 RCW, shall be used for the state educational loan program. Such appropriated funds shall be deposited in the state educational loan account established in section 2 of this act. Moneys in the loan account shall be used to make guaranteed loans to needy or disadvantaged students, as defined in RCW 28B.10.802 (3) and (4).

(2) The amount of the loans made under subsection (1) of this section shall not exceed the demonstrated financial need of the student. The board shall establish loan terms and conditions that are consistent with terms of the guaranteed loan program established by 20 U.S.C. Sec. 1701 et seq. The terms and conditions established by the board shall allow interest accumulation on the loans to be deferred for one year following the recipient's cessation of full-time studies.

(3) All loans made under this section shall be guaranteed by the Washington student loan guaranty association or its successor agency. The board is hereby granted full authority to operate as an eligible lender under the guaranteed loan program.

(4) Before approving a guaranteed loan, the board shall analyze the ability of the student to repay the loan based on factors that include, but are not limited to, the student's accumulated total education loan burdens. The board shall direct institutions of higher education to counsel students on the advisability of acquiring additional debt and on the availability of other forms of financial aid.

(5) The board is responsible for collection of loans made under subsection (1) of this section and shall exercise due diligence in such collection, maintaining all necessary records to ensure that maximum repayments are made. The board shall cooperate with other lenders and the Washington student loan guaranty association, or its successor agency, in the coordinated collection of guaranteed loans and shall assure that the loans continue to meet guarantee requirements. Collection and servicing of loans under subsection (1) of this section shall be performed by entities approved for such servicing by the Washington student loan guaranty association or its successor agency. The board may perform such servicing if specifically recognized to do so by the Washington student loan guaranty association or its successor agency.

(6) Receipts from payment of interest and principal or any other subsidies to which the board as lender is entitled, that are paid by or on behalf of borrowers of funds under subsection (1) of this section, shall be deposited in the state general fund.

(7) The board shall maintain accurate records of the costs of making the loans under subsection (1) of this section, including the costs of recordkeeping and making collections under subsection (5) of this section. The board shall endeavor to keep such costs as low as is feasible and shall report such costs on an annual basis to the office of financial management.

(8) Lending activities under this section shall make maximum use of secondary markets in the support of loan consolidation. No loans may be made to any student who is known by the board or by an institution of higher education to be in default or delinquent in the payment of an outstanding student loan.

(9) The board shall adopt necessary rules to implement this section. The institutions of higher education shall cooperate fully with the board in fulfilling the provisions of this section, RCW 28B.10.808, and section 2 of this act.

NEW SECTION. Sec. 2. A new section is added to chapter 28B.10 RCW to read as follows:

The state educational loan account is hereby established in the state treasury. Seventy percent of all state-appropriated funds for the state financial aid program, other than those for the college work-study program established under chapter 28B.12 RCW and programs under chapters 28B.101, 28B.102, 28B.104, 28B.107, and 28B.108 RCW, shall be deposited in this account. Expenditures from this account shall be for guaranteed student loans to needy or disadvantaged students pursuant to section 1 of this act. The board may authorize expenditures from this account. The board shall deposit any refunds or returns of unused portions of student loans in this account. All earnings of investments of balances in the state educational loan account shall be credited to the general fund. Receipts from the payment of interest or principal or any other subsidies that are paid by or on behalf of borrowers of funds provided through this account shall be deposited in the general fund.

Sec. 3. RCW 28B.10.808 and 1991 c 164 s 4 are each amended to read as follows:

In awarding grants, the ((~~commission~~)) board shall proceed substantially as follows: PROVIDED, That nothing contained herein shall be construed to prevent the ((~~commission~~)) board, in the exercise of its sound discretion, from following another procedure when the best interest of the program so dictates:

(1) The ((~~commission~~)) board shall annually select the financial aid award winners from among Washington residents applying for student financial aid who have been ranked according to financial need as determined by the amount of the family contribution and other considerations brought to the ((~~commission's~~)) board's attention.

(2) The financial need of the highest ranked students shall be met by grants depending upon the evaluation of financial need until the total allocation has been disbursed. However, no individual student may receive more than two-thirds of his or her total state financial aid program award, yearly, in the form of grants. At least one-third of each student's total state financial aid program award, yearly, shall be in the form of loans. Funds from grants which are declined, forfeited or otherwise unused shall be reawarded until dispersed.

(3) A grant may be renewed until the course of study is completed, but not for more than an additional four academic years beyond the first year of the award. These shall not be required to be consecutive years. Qualifications for renewal will include maintaining satisfactory academic standing toward completion of the course of study, and continued eligibility as determined by the ((~~commission~~)) board. Should the recipient terminate his or her enrollment for any reason during the academic year, the unused portion of the grant shall be returned to the state educational grant fund by the institution according to the institution's own policy for issuing refunds, except as provided in RCW 28B.10.8081.

(4) In computing financial need the ((~~commission~~)) board shall determine a maximum student expense budget allowance, not to exceed an amount equal to the total maximum student expense budget at the public institutions plus the current average state appropriation per student for operating expense in the public institutions.