HB 1823, which will be heard by the House Appropriations Committee tomorrow, would remove actuarial and sustainability requirements from the not-yet-implemented Washington student loan program.

Last year, the Legislature enacted E2SHB 1736, establishing the Washington student loan program. (The program is codified as RCW 28B.93.) The bill left the details of the program to be determined later by the Washington Student Achievement Council (WSAC). Specifically, WSAC is required to design the program and make recommendations about the interest rate, loan limits, repayment terms, and eligible borrowers. WSAC is required to contract with an actuary to analyze the program’s sustainability, including whether it would be self-sustaining if loans were issued at 1%. Then WSAC was required to report to the Legislature on its plan by Dec. 1, 2022. (RCW 28B.93.020)

Although the Legislature did not spell out the details of the program, the intent section of the statute includes, “The legislature intends to offer student loans to state residents with financial need who are pursuing undergraduate and high-demand graduate studies at a subsidized, one percent interest rate” (RCW 28B.93.005).

Additionally, statute specifies that no student loans will be awarded until SY 2024–25, and that they “shall not be issued unless the program design recommended [by WSAC] is forecasted by an independent actuary to be self-sustaining and the interest rates for the loans issued under the program do not exceed one percent” (RCW 28B.93.030.)

The 2022 operating budget appropriated a total of $150 million from the general fund–state and the workforce education investment account to the Washington student loan account to implement the program. (Gov. Inslee’s budget proposal would transfer that appropriation from 2021–23 to 2023–25.)

The WSAC report that was due Dec. 1, 2022 has not been posted publicly. Apparently it was produced earlier this year. The bill report for HB 1823 notes, “In January 2023 the WSAC reported to the Governor and Legislature on the Program’s design, sustainability, and implementation. That report made policy recommendations to define self-sustainability as a target life cycle of the fund for five to 10 years.” Other than that, it’s not clear what the report may have recommended.

As approved by the House Committee on Postsecondary Education & Workforce Feb. 17, HB 1823 would amend the intent statement of the statute (RCW 28B.93.005) to read, “The legislature intends to offer student loans to state residents with financial need who are pursuing high-demand graduate studies at a subsidized interest rate not to exceed one percent.”

Thus, HB 1823 would specify a new intention to exclude undergraduates, but WSAC would still be required to determine the details of the program. Additionally, HB 1823 would push the program out another year: Another report on the plan would be due from WSAC by Dec. 1, 2023, and no student loans would be issued before SY 2025–26.

By statute, the loan program must include WSAC’s recommendations. HB 1823 would amend that to specify that the “Washington student loan account have a minimum life cycle of seven years and that loans issued under the program do not exceed one percent.”

There was a question at the public hearing for HB 1823 in the House Committee on Postsecondary Education & Workforce about what a “life cycle of seven years” means—staff suggested that it was meant to indicate a revolving fund but they did not have a definitive answer. Also, Rep. Waters asked what happens if students don’t pay the loans back. Chair Slatter said,

I just happen to be familiar a little bit with the underlying bill. It will be forgiven if students can’t pay, but it also is an income-based repayment program that was originally designed that way. . . but you have to model all of that. . . . the modelling did not occur in the period of time the bill was initially passed out of the Legislature, so this is a fix to that prospect.

But Chair Slatter was not referring to the underlying bill that passed the Legislature last year. She was referring to a version of the bill that was passed by the House but not the Senate. There is nothing in current statute about what would happen if loans aren’t repaid.

Indeed, the student loan program is barely outlined in statute, let alone fleshed out to the point that such questions could be answered. And HB 1823 wouldn’t change that.

Troublingly, HB 1823 would remove the statutory requirement to contract with an actuary as part of the design process. Instead, WSAC would be allowed to “retain a consultant to design a loan program, including one or more financial advisors, to provide consultation on the sustainability of the loan program.” Additionally, the current requirement that the program be determined by an actuary to be self-sustaining before any loans may be issued would be repealed.

The actuarial and sustainability requirements were not in the version of HB 1736 that originally passed the House last year. As noted above, the House had originally passed a version of HB 1736 that specified many program details. But the Senate passed a version of the bill that stripped those details and left design to WSAC.

The Senate also added the actuarial and sustainability requirements, in the wake of the discovery of cash deficits in the paid family and medical leave (PFML) program. The PFML program was just a few years old but had not been actuarially scrutinized before it was implemented.

The experience of the PFML program shows how important it is to consider sustainability when beginning new long-term programs. Has the Legislature already forgotten this lesson?