State-Run Student Loan Service To Offset High Interest From Private Companies?
Washington State just approved a state-run student loan program that looks to offer college students low interest rates.
Higher Education is rife with issues. All of this is culminating in a finding that fewer students are opting for a college degree, and instead heading straight for the American workforce. While there are a plethora of reasons for this finding, one major cause for this is high-interest rates, which have proven to oftentimes keep students in debt for the majority of their adult life. The feds are attempting to combat this in a variety of ways, but one state has come up with its own solution. Washing state wants to get into the student loan industry, through a state-run student loan program that would offset companies that impose crippling rates for student loan borrowers.
Democratic lawmakers in the state of Washington proposed a bill this year to tackle the issue of student loan companies imposing outrageous fees on college students looking to borrow money to pay for school. Gov. Jay Inslee signed the act, known as House Bill 1736, allowing the state to establish its own student loan program. The goal is simple: to make higher education more manageable and attainable for Washington residents.
While the student loan program is now green-lit, it still has a ways to go before becoming reality for college students in Washington. According to reports from Axios, the hope is that the state will be able to impose extremely low-interest rates for students, as low as just 1%. But in order to bring this plan to fruition, it needs to prove feasible first.
When the bill was approved, $150 million of state funds were set aside to finance the start-up costs for this state-run student loan program. To make sure the eligibility is only benefiting those who truly need it, students will only be eligible if their families make the state’s level of median income or less. The initiative is set to roll out beginning in the fall of 2024. However, there’s a caveat: lawmakers helming the endeavor need to prove the program is financially sustainable for years to come.
In actuality, Washington’s state-run student loan program isn’t unheard of. Plenty of other states offer similar state-level services. However, Washington is the first to attempt to make this type of program available with such a low rate of interest, and some are hesitant that it can be pulled off without wasting millions of taxpayer dollars and offsetting the entire purpose.
Washing Republican lawmakers expressed concerns with the student loan program throughout its battle through the Capitol. For one, they feared what could happen to state funds when students fail to repay these loans. Similarly, though, Democrats have also expressed concerns over making sure the endeavor isn’t a total failure. To acknowledge this, the state has hired an independent actuary to evaluate the ins and outs of how it would work. A report is due on the desk of Washington’s governor by December 1st.
Whether or not the student loan program ever takes off remains unknown, but lawmakers are hopeful it can make a dent in the growing failure of state colleges and universities. Student loan debt is said to be crippling many Americans’ abilities just to stay afloat, and something surely needs to change. Tackling student loan interest rates is at the least a starting point.