BILL REQ. #:  S-3958.1 

Read first time 01/10/2006.   Referred to Committee on Early Learning, K-12 & Higher Education.

     AN ACT Relating to zero interest loans for higher education; and adding a new chapter to Title 28B RCW.

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

NEW SECTION.  Sec. 1   Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.
     (1) "Institution of higher education" or "institution" means a two or four-year college or university in the state of Washington that is authorized by the higher education coordinating board.
     (2) "Board" means the higher education coordinating board.
     (3) "Public school" means an elementary school, a middle school, junior high school, or high school within the public school system referred to in Article IX of the state Constitution.
     (4) "Satisfied" means paid-in-full.
     (5) "Participant" means an eligible student who has received a zero interest loan under this chapter.

NEW SECTION.  Sec. 2   The zero interest loan program is established for students attending a Washington institution of higher education. The first loans shall be made to eligible students enrolling in an institution of higher education in the 2006-07 academic year. The program shall be administered by the board. In administering the program, the board shall:
     (1) Select students to receive zero interest loans;
     (2) Adopt necessary rules and guidelines;
     (3) Publicize the program;
     (4) Collect and manage repayments from students; and
     (5) Solicit and accept grants and donations from public and private sources for the program.

NEW SECTION.  Sec. 3   The board shall design the Washington zero interest loan program based on the following parameters:
     (1)(a) Loans shall be made to students graduating from public and approved private high schools under chapter 28A.195 RCW, students participating in home-based instruction as provided in chapter 28A.200 RCW, and persons twenty-one years of age or younger receiving a GED certificate, who meet the financial eligibility criteria in this section.
     (b) To meet the financial eligibility criteria, a student's family income shall not exceed one hundred thirty-five percent of the state median family income adjusted for family size, as determined by the board for each graduating class. Students not meeting the eligibility requirements for the first year of the loan may reapply for a second year, but must still meet the income standard set by the board for the student's graduating class.
     (2) Zero interest loans are not intended to supplant any grant, scholarship, or tax program related to postsecondary education. If the board finds that zero interest loans supplant or reduce any grant, scholarship, or tax program for categories of students, then the board shall adjust the financial eligibility criteria or the amount of loan to the level necessary to avoid supplanting.
     (3) The loans may only be used for undergraduate coursework at accredited institutions of higher education in the state of Washington.
     (4) The loans may be used for college-related expenses, including but not limited to, tuition, room and board, books, and materials.
     (5) Loans may not be awarded to any student who is pursuing a degree in theology.

NEW SECTION.  Sec. 4   The board may provide zero interest loans to eligible participants from the funds appropriated to the board for this purpose, or from any private donations, or any other funds given to the board for this program. The amount loaned to an individual may not exceed the amount of tuition and fees at the institution of higher education attended by the participant or resident undergraduate tuition and fees at the University of Washington per academic year for a full-time student, whichever is lower. Participants are eligible to receive loans for a maximum of five years.

NEW SECTION.  Sec. 5   (1) Participants in the zero interest loan program incur an obligation to repay the loan upon completion of a postsecondary education program or five years after they first receive a loan under this chapter, whichever is earlier.
     (2) Participants who fail to complete their postsecondary education program must repay their loan beginning no later than five years after they first receive the loan.
     (3) The minimum payment shall be set by the board. The maximum period for repayment shall be ten years, with payments of principal accruing quarterly commencing six months from the date the participant completes or discontinues the course of study. Provisions for deferral of payment shall be determined by the board.
     (4) The board is responsible for collection of repayments made under this section and shall exercise due diligence in such collection, maintaining all necessary records to ensure that maximum repayments are made. Collection and servicing of repayments under this section shall be pursued using the full extent of the law, including wage garnishment if necessary.
     (5) Receipts from the payment of principal or any other subsidies to which the board as administrator is entitled, which are paid by or on behalf of participants under this section, shall be deposited in the zero interest loan account and shall be used to cover the costs of granting the loans, maintaining necessary records, and making collections under subsection (4) of this section. The board shall maintain accurate records of these costs, and all receipts beyond those necessary to pay such costs shall be used to grant loans to eligible students.
     (6) The board shall adopt rules to define the terms of repayment, including fees and deferments.

NEW SECTION.  Sec. 6   (1) The zero interest loan account is created in the custody of the state treasurer. An appropriation is not required for expenditures of funds from the account. The account is not subject to allotment procedures under chapter 43.88 RCW except for moneys used for program administration.
     (2) The board shall deposit in the account all moneys received for the program. The account shall be self-sustaining and consist of funds appropriated by the legislature for the zero interest loan program, private contributions to the program, and receipts from participant repayments.
     (3) Expenditures from the account may be used solely for zero interest loans to participants in the program established by this chapter and costs associated with program administration by the board.
     (4) Disbursements from the account may be made only on the authorization of the board.

NEW SECTION.  Sec. 7   Sections 1 through 6 of this act constitute a new chapter in Title 28B RCW.