State-backed student loan programs would benefit students and Washington

OLYMPIA – After Sallie Mae acquired the Washington Student Loan Finance Association (WSLFA) in 2004, it left students with one fewer option to obtain a tax-exempt educational loan. To fill the void, the Washington Higher Education Facilities Authority (WHEFA), which issues bonds for college and university buildings, was tapped to replace WSLFA.

A bill offered by Sen. Paull Shin, D-Edmonds, would give low- and middle-income students an additional financing route.

“Personally, I hate to see students borrowing money to finance their education. But that is the reality we live in,” said Shin, a former college professor of more than 30 years. “This is a means to finance educational loans without burdening the state. This bill will also minimize a student’s financial burden.”

Senate Bill 5385 would authorize the WHEFA to offer supplemental student loans, which could save students an average of $5,000 over the term of a loan. The loans will particularly benefit students who don’t qualify for federal loans or grants because of their income. The bill passed unanimously in the state Senate and now moves to the House of Representatives for further consideration.

Although WHEFA traditionally issues bonds for higher education capital projects, Shin wants it to add student loan financing to its product offerings.

Many students seek federal loan programs to finance their education. But a state-backed loan program, such as through WHEFA, decreases interest rates for all lenders, not just non-profits.

Under Shin’s bill, WHEFA would provide oversight, policy development and coordination of student loans bond options with stakeholders and educators. It would also have the power to form non-profit special purpose corporations or could contract with non-profit corporations to purchase and issue educational loans and bonds.

Students who secure private loans would see a benefit through tax-exempt financing.

WHEFA receives no state money. Its operations are funded solely through fee collections from each borrower. Consequently, there is no burden on the state budget and no financial risk to the state.

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