OLYMPIA – High-interest loans can no longer discourage low-income families seeking higher education under legislation reviewed by the Senate Appropriations Committee on Monday.
House Bill 1736 would create the Washington Student Loan Program, an option for eligible residents to take out student loans at a rate of 1 percent. The program will start issuing low-interest loans in the academic year 2024-2025.
Senator Judy Warnick, R-Moses Lake, said the program could just end up as another significant expense in the Democratic budget. Expenditure has already risen sharply over the past decade, he said, although the legislature has maintained surpluses such as the current $ 15 billion.
“(It’s an (incredible) cost to future budgets and legislatures,” Warnick said.
Washington already has tuition assistance programs and has more than the legislature now. He wondered if he needed a program when the others were already working on it.
Senator John Braun, R-Centralia, believes funding for the program could be better spent elsewhere. The legislature already invests about $ 1.1 billion every two years in financial assistance.
Brown said Washington is currently ranked as the second highest state in terms of access 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 significant money on financial aid seems pointless … when we have so many other challenges ahead of us.”
During Monday’s meeting, Senate Committee Chair Christine Rolfes, on D-Bainbridge Island, amended the bill to remove the $ 300 million budget note intended to create the program. He said he wanted to allow lawmakers to take the program in another direction, if they so decided.
“I feel uncomfortable with an account that comes out (I expect) hundreds of millions of dollars in expenses,” Rolfes said, “without knowing the certainty of the details behind the structure of the plan.
If the bill goes into effect, students receiving low-interest loans will still be able to receive private and federal loans, but only after the state program. Eligible individuals must be residents of a state with a family income equal to or lower than the median family income.
Loans will begin to accrue interest after a six-month grace period when the student is no longer enrolled in at least half of the regular program. There are no related borrowing fees and the loan can not exceed the cost of attending the student.
Warnick said she was concerned about the repayment plans outlined in the bill. He said he felt he lacked accountability, which people can abuse over time.
HB 1737 describes two repayment plans. The standard program allows the borrower to repay the total debt over a period of ten years, while the second program requires the borrower to pay a monthly amount not exceeding 10 percent of his income. after 20 years, any remaining balance is forgiven.
“Why would anyone want to pay,” Warnick said, “if he knows he will be forgiven after 20 years?”
He 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 expediency given this meeting given the recent amendments by the committee chairman.
Zack Turner, executive director of the Washington Student Association, said the state’s current systems are broken and an obstacle for many families seeking higher education. Many loans come with interest rates of 7 to 9 percent, which he considers a tax on poverty.
“No student should take on a lifetime of debt just to pursue higher education,” Turner said.
More than 800,000 Washington residents share a collective student loan debt of about $ 28 billion, he said. High interest rates can lead to decades of repayment, acting as a barrier to the financial stability college it’s supposed to provide.
Turner wants a future in which students will 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 a maximum total loan limit of $ 12,000. Postgraduate students could receive up to $ 5,000 in annual loans, with a maximum total of $ 10,000.
Graduate students who are eligible for loans must enroll in a specialized field of study that the state program has identified as having a shortage of manpower.
The Senate Appropriations Committee took action on HB 1737 at its meeting on Monday, passing the legislation to the Rules Committee for further consideration.