A small bipartisan group of senators is close to reaching a compromise to avert the impending increase on student-loan interest rates, but it’s far from a done deal. And time is running short.
Interest rates on unsubsidized Stafford student loans will double from 3.4 percent to 6.8 percent on July 1 unless Congress acts. A proposal emerging from negotiations between Sens. Joe Manchin, D-W.Va., Angus King, I-Maine, Tom Coburn, R-Okla., and Richard Burr, R-N.C., has been a tough sell with Senate Democrats because it doesn’t cap rates on individual loans. Rather, it caps consolidated loans at 8.25 percent and ties interest rates on all new undergraduate Stafford loans to the 10-year Treasury note, plus 1.95 percent.
But even if senators can work through their differences, it’s unlikely a vote will come before July 1, with immigration legislation jamming the legislative calendar. The Senate could address the issue retroactively when it comes back from its Fourth of July recess.
“Everyone’s focused on immigration right now. They haven’t turned their thoughts to this,” Senate Health, Education, Labor, and Pensions Chairman Tom Harkin, D-Iowa, said. “We’ve talked about it in caucus a couple of times, but everyone’s” looking at immigration.
The National Association of Student Financial Aid Administrators, which opposes a short-term extension, has been telling its members to expect the rate to double to 6.8 percent. Group President Justin Draeger said the bipartisan compromise looks promising, “but then you rub that up against the political reality, it starts to look a little far-fetched.”
Senate Majority Leader Harry Reid said he met with Sen. Lamar Alexander, R-Tenn., and Burr, as well as Harkin, “to see if there’s some way we can bridge the gap. There has been progress made.” But he noted there’s disagreement over using money generated from the loans for deficit reduction and not including a cap.
Harkin, who previously criticized President Obama for proposing to tie the rates to the 10-year Treasury note, said, “We have compromised on a couple of very important items. We’re asking Republicans to compromise, and we are insisting on a cap on individual student loans like we’ve always had in the past.” He added, “We’re willing to work, jiggle interest rates around and things like that, but we’re not willing to give up a cap.”
House Republicans, who passed a plan of their own in May, have been using the issue to criticize Senate Democrats.
Harkin suggested another vote to extend the current rates. Such a plan failed in the Senate earlier this month, gaining just 51 votes. “Well, maybe we’ll just have to have another vote on it,” Harkin said, “so people will know exactly who’s raising their rates from 3.4 percent.”
This article appears in the June 26, 2013, edition of NJ Daily as Even With Compromise, Loan Rates Likely to Increase.