Washington state plans to get into the student loan business
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State lawmakers want to offer student loans with 1% interest rates — but first they have to make sure their idea pencils out.
Why it matters: As of 2017, at least 800,000 residents had student loan debt, a 35% increase from a decade earlier, according to the state attorney general's office.
- High levels of student debt can hurt people's ability to pay their bills, save money, buy homes, and even start families, the report says.
What's happening: Earlier this year, Washington lawmakers approved $150 million to start a state-run student loan program intended for students whose families make the state's median income or below.
Yes, but: There's a catch. The program will begin issuing loans in fall of 2024, but only if a state study first finds the program financially sustainable.
Zoom out: While several other states offer some form of a student loan program, most have higher interest rates than the 1% loans Washington is pursuing, according to the National Conference of State Legislatures.
What they're saying: State House Majority Leader Pat Sullivan (D-Covington) said he wanted to create a new program because he thinks too many families have to take out private loans at high-interest rates to pay for higher ed.
- Sullivan, who sponsored the student loan bill, said the federal government assumes families can pay a certain amount based on their income level, but often they can't afford it.
- "It's not fair to dependent students," Sullivan told Axios. "If their parents don't contribute the amount that the federal government assumes, then they're stuck with that hole."
The other side: Republicans expressed concern about using $150 million in taxpayer money to pay for the program, particularly if students end up not repaying the loans.
- "I have no trouble risking a little, but we're risking a lot," said state Sen. Keith Wagoner (R-Sedro Woolley) during a Senate floor debate in March.
- Democrats in the state Senate also wanted to make sure the program is financially sound. "If you are looking to do a long-term investment in higher education, you want it to work," state Sen. Christine Rolfes, the upper chamber's lead budget writer, told Axios.
What's next: State officials will design the loan program and hire an independent actuary to evaluate it.
- A report is due to the governor's office and the Legislature by Dec. 1.
- If the analysis finds the program can stay afloat while offering loans at 1% interest rates, it will move forward.
- But, if the analysis finds the program won't be self-sustaining, the legislature will take another look, Rolfes said.
- That could mean spending the $150 million in a different way, such as on expanding college scholarships, she said.