State Legislation Could Provide Low-Interest Student Loans

OLYMPIA — High-interest loans can no longer deter low-income families from pursuing higher education under legislation considered by the Senate Ways and Means Committee on Monday.

House Bill 1736 would create the Washington Student Loan Program, an option for eligible residents to receive student loans at a 1% interest rate. The program would begin providing low-interest loans in the 2024-2025 academic year.

Sen. Judy Warnick, R-Moses Lake, said the program could end up as another big expense in the Democratic budget. Spending has already increased significantly over the past decade, she said, even as the legislature has held surpluses such as the current $15 billion.

“(It’s an) incredible expense that we’re imposing on future budgets and legislatures,” Warnick said.

Washington already has tuition assistance programs and has more to come through the legislature now. She wondered if a program was needed when the others were already dealing with the current issue.

Sen. John Braun, R-Centralia, believes the program’s funding could be better spent elsewhere. The Legislature already invests about $1.1 billion per biennium in financial assistance.

Braun said Washington currently ranks second among states for accessibility to higher education and maintains a tuition rate below the national average.

“We are at the top, among the best in the country,” he said. “Spending this kind of substantial money on financial aid seems out of place…when we have so many other challenges ahead of us.”

During Monday’s meeting, committee chair Sen. Christine Rolfes, D-Bainbridge Island, amended the bill to remove the $300 million tax memo intended to create the program. She said she wanted to allow lawmakers to take the program in another direction if they so choose.

“I’m not comfortable with a bill coming out (expecting) hundreds of millions of dollars in spending,” Rolfes said, “without knowing the certainty of the details behind the structure of the plan.

If the bill is signed into law, students who receive the low-interest loan could still take out private and federal loans, but only after the state program. Eligible persons should be residents of the state with a family income at or below the median family income.

The loans would start bearing interest after a six-month grace period when the student is no longer enrolled in at least half of a regular schedule. There are no associated loan fees and the loan cannot exceed the student’s tuition.

Warnick said she was concerned about the repayment plans outlined in the bill. She said she felt he lacked accountability, which people might abuse over time.

HB 1737 describes two repayment plans. The standard plan allows the borrower to repay the entire debt over a period of ten years, while the second plan obliges the borrower to pay a monthly sum not exceeding 10% of his income; after 20 years, any remaining balance is forfeited.

“Why would anyone want to pay,” Warnick said, “if they know it’s going to be forgiven after 20 years?”

She said people should pay their debts, but this bill allows people to avoid them. Warnick voted against HB 1736 at the committee meeting, later questioning his feasibility of passing that session given the committee chair’s recent amendments.

Zack Turner, executive director of the Washington Student Association, said the state’s current systems have broken down and are a barrier for many families seeking higher education. Many loans carry interest rates of 7-9%, which he sees as a tax on poverty.

“No student should have to go into lifelong debt just to pursue higher education,” Turner said.

More than 800,000 Washingtonians share a collective student debt of about $28 billion, he said. High interest rates can lead to decades of repayment, acting as a barrier to the financial stability that college is supposed to provide.

Turner wants a future in which students don’t have to depend on student loans.

If HB 1737 is enacted, undergraduate students could receive an annual loan of up to $3,000, with a maximum total loan limit of $12,000. Graduate students could receive up to $5,000 in annual loans, with a maximum total of $10,000.

Graduate students who qualify for loans must be enrolled in a specialized field of study that the state curriculum has identified as having a labor shortage.

The Senate Ways and Means Committee took executive action on HB 1737 at Monday’s meeting, moving the legislation to the Rules Committee for further consideration.

About Judith J. George

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