State legislation could provide low-interest student loans

OLYMPIA — High-interest loans may no longer deter low-income families seeking higher education under legislation considered by the Senate Ways & Means Committee on Monday.

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

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

"(It's an) incredible expense that we were imposing on future budgets and legislatures," Warnick said.

Washington already has tuition assistance programs and has more coming through the legislature now. She questioned whether a program is needed when the others are already addressing the matter at hand.

Sen. John Braun, R-Centralia, believes the program's funding could be better spent somewhere else. The legislature already invests around $1.1 billion each biennium in financial aid.

Braun said Washington currently ranks as the second-highest state for accessibility to higher education and maintains a tuition rate below the national average.

"We are at the very top, among the very best in the country," he said. "Spending this kind of substantial money on financial aid seems misplaced … when we have so many other challenges in front of us."

During the Monday meeting, committee chair Sen. Christine Rolfes, D-Bainbridge Island, amended the bill to remove the $300 million fiscal note intended to create the program. She said she wanted to allow legislators to take the program in another direction if they decided.

"I'm uncomfortable with a bill going out (expecting) hundreds of millions of dollars in expenditures," Rolfes said, "without knowing the certainty of the details behind the structure of the plan.

If the bill is enacted, students who receive the low-interest loan could still take out private and federal loans, but only after the state program. Qualifying individuals would have to be state residents with a family income at or below the median family income.

The loans would begin accruing interest after a grace period of six months when the student is no longer enrolled in at least half a regular schedule. There are no associated lending fees and the loan may not exceed the student's cost of attendance.

Warnick said she is concerned with the repayment plans outlined in the bill. She said she feels it lacks accountability, which people may abuse over time.

HB 1737 outlines two repayment plans. The standard plan allows the borrower to repay the total debt over a period of ten years, while the second plan requires the borrower to pay a monthly sum not exceeding 10 percent of their income; after 20 years, any remaining balance is forgiven.

"Why would anybody 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 during the committee meeting, later questioning its feasibility of passing this session given the committee chair's recent amendments.

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

"No student should have to take on a lifetime of debt just to pursue a higher education," Turner said.

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

Turner wants a future in which students would not have to rely on loans for their education.

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

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

The Senate Ways and Means Committee took executive action on HB 1737 during the Monday meeting, moving the legislation to the Rules Committee for further review.