There are over 800,000 student loan borrowers in Washington, many of them unable to afford monthly payments. Today, Governor Jay Inslee signed the Student Opportunity, Assistance, and Relief (SOAR) Act that will help many of these borrowers pursue their dreams of education without the burden of staggering debt.
“The change in the law means that borrowers in default can continue to work in their trained fields, pay their obligations, and maintain financial stability,” said Lili Sotelo, Directing Attorney at Columbia Legal Services. “This is a common-sense approach that affects the economic health of our state and is long overdue.” Columbia Legal Services applauds the work of Representative Tina Orwall (D-Des Moines) and Governor Inslee on this important issue. At the request of legislators, the Northwest Justice Project provided important insights as to how the bill could help student loan debtors.
Increasingly, students and their families finance higher education with private loans, which are not eligible for the important deferment, income-based repayment, or loan forgiveness options that come with federal student loans. These loans carry higher interest rates and fees, have higher default rates, default faster than federal loans, and are subject to collection lawsuits. Black and Latino students are disproportionately impacted by student debt. The Washington State Attorney General’s Office found that 90% of Black and 72% of Latino undergraduates have student loans compared with 66% of white students.
The SOAR Act (HB 1169) changes Washington collection laws for private student loans:
- Reduces the 12% postjudgment interest rate, which was the highest in the country, to two percentage points above the prime rate;
- Exempts from garnishment the greater of 85% of earnings or fifty times the minimum hourly wage of the highest minimum wage law in the state. That is up from the greater of 75% of earnings or thirty-five times the federal minimum wage;
- Exempts from garnishment $2,500 in bank accounts. That is up from a mere $500 that was exempt before the Act.
The Act also repeals Washington laws that permit regulators of twenty-six professions to suspend the professional licenses or certificates of student loan borrowers who have defaulted on their loans. “These aggressive and counterproductive collection laws did little more than hinder a borrower’s ability to support themselves and their families, much less repay the obligation,” added Sotelo.
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