WA’s new financial aid program will provide low-interest loans to graduate students, not just undergraduates
Washington is developing a new low-interest loan program to make it cheaper for students to borrow money for school – and in an unusual move, the state is also making it available of some graduate students.
The program will provide low-interest loans to low-income undergraduate and graduate students in high-demand fields of study, with a target interest rate of 1%.
This is much less than what is generally offered; current interest rates on federal direct loans are 3.73% for undergraduate students and 5.28% for graduate students, while some private student loans charge an interest rate of 10 % or more.
House Majority Leader Pat Sullivan, D-Covington, who drafted the bill, said it was an important tool to reduce the amount of debt plaguing borrowers after the graduation. “I know that the best solution to ensure student success after graduation is not debt, but in today’s world we live in, that’s just not a reality for far too many. students,” Sullivan said.
Since the vast majority of scholarships and grants are exclusively for undergraduate students, it is common for graduate students to take out loans to complete their studies.
The bill creating Washington’s new loan program initially didn’t include graduate students at all, but Sullivan said they made a compelling case.
Payton Swinford is one of them — he’s the vice president of external affairs for the Senate of Graduate and Professional Students at the University of Washington.
“Graduate student debt has skyrocketed… financial pressure is one of the most talked about challenges for the graduate student population that I represent,” he said.
According to a report from the Center for American Progress, national graduate student debt increased by 7% between 2010 and 2018, with undergraduate student debt decreasing by 21% over the same period.
While not all graduate students will be eligible for the state’s new low-interest loans, Swinford said, including at least some of them is a step in the right direction. He suggested this could serve as a model for creating even more financial aid options in the future. This same report indicates that graduate students account for approximately 40% of federal student loan debt while accounting for only 15% of all higher education enrollment each year.
“We need to start working to address the inequities and disparities around who can get graduate degrees,” Swinford said.
Jill Desjean, senior policy analyst at the National Association of Student Financial Aid Administrators, said higher education is mostly funded by debt. “Of course, earnings should be higher if you have an advanced degree, but it varies significantly depending on what degree you have,” Desjean said. “It’s still a lot to borrow.”
Data collected by the Institute for College Access and Success show that 47% of Washington’s four-year college graduates graduated in debt in 2020 — the state estimates its more than 800,000 borrowers currently in debt owe an average of $33,500. These numbers are even higher for higher-level graduates: The Education Data Initiative says the country’s average debt for graduate degree holders was $71,000 in 2016, rising to about $82,800 when their undergraduate loan debt was included.
Desjean pointed out that policymakers at the federal level also seem disinterested in expanding graduate student financial aid offerings — with the occasional proposal to cut back or eliminate existing programs altogether.
“In general, federal support is not a priority,” Desjean said.
The higher education guidance council, the Washington Student Achievement Council, has many questions to answer before the state can roll out its new low-interest student loans, which are expected to begin in 2024.
To begin, the board — working with the Office of the State Treasurer and the State Board of Investment — will need to refine the specific terms of the loans and ultimately recommend what portion of the funding should be available for certain graduate students per year. compared to undergraduate students. Legislation creating the program states that undergraduates with family incomes at or below the state median are eligible, prioritizing those with the greatest unmet financial need.
The state must also determine which graduate students might be eligible in the first place; the law states that only those from fields of study experiencing a labor shortage or considered to be in high demand will be eligible, such as software development, nursing, and teaching.
State agencies tasked with designing the inner workings of the new lending option also need to consider what sustainability of the $150 million program might realistically look like. They will subject the plan to an independent review to ensure that the program can be self-sustaining with a 1% interest rate.
Mike Meotti, executive director of the Washington Student Achievement Council, said many questions about the newly passed legislation remain unanswered, but analysis and program development will begin this summer.
“We are still very, very early in this area,” he said.
One thing is clear, though: Meotti said no matter how specific details turn out, students won’t have to search for application materials on the board’s website.
“However we implement this, we’ll keep it simple for students,” Meotti said. “You’ll have access to anything state or federal government-related if you go to the financial aid office on the campus you’re applying to or where you’re already a student.”
A report outlining the details of the program and how it works is due in the Legislative Assembly in December.