This year the Legislature passed E2SHB 1736, which establishes the Washington student loan program. (The bill has not yet been signed by the governor.)

The bill requires the Washington Student Achievement Council (WSAC) to design a student loan program that has an interest rate that is lower than loan rates subsidized by the federal government. The WSAC will have to make recommendations about how loans should be distributed between undergraduate and graduate students, the terms of the loans, the terms of a repayment program, and who is eligible (with a requirement that low-income students be prioritized). The WSAC must report to the governor and Legislature on the plan design by Dec. 1, 2022.

At the same time, the bill defines “eligible students” as state residents with median family income of 100% or less than median state income who are enrolled in an undergraduate program or in a graduate program in a field with a workforce shortage or that is high demand. Loan origination will be contracted out to state-based financial institutions. Additionally, student loans under the program will be awarded beginning in school year 2024–25.

Importantly, the bill requires an actuarial analysis of the sustainability of the program, including its ability to be self-sustaining if the loans have a 1% interest rate. Student loans “shall not be issued” unless the program design is actuarially forecast to be self-sustaining and the interest rates do not exceed 1%.

The bill creates the Washington student loan account. The supplemental operating budget appropriates $150.0 million from funds subject to the outlook (NGFO) to the Washington student loan account (sec. 737) and then it appropriates $150.0 million from the student loan account to implement E2SHB 1736 (sec. 609(22)). (Note that no loans will be made before SY 2024–25, which is in the 2023–25 biennium.)

The $150.0 million from the NGFO is intended to be one-time; E2SHB 1736 notes that it should “cover annual student loan originations and expenses until repayments are substantial enough to support the program on an ongoing basis.”

(Previous posts on the supplemental budget are here.)