Student Loan Twofer: Both Senate Rate Cap Bills Shot Down

NEW YORK (MainStreet)—Two bills were voted down by the Senate on Friday that would have halted the spike in rates on federal student loans, which are set to double on July 1 from 3.4% to 6.8%.

The Democratic bill—The Student Loan Affordability Act, introduced by Senators Jack Reed (D-RI) and Tom Harken (D-IA)-would have locked in the current rates for the next two years. This temporary fix would have removed a rate hike as an issue from the 2014 off-year election. A Republican bill, The Comprehensive Student Loan Protection Act introduced by Senators Tom Coburn (R-OK) and Richard Burr (R-NC), would have linked rate rises at 2% above the 10-year Treasury bill.

Both the Obama administration and House Republicans are advocating similar solutions that would link rate increases to the 10-year T-bill. Total student loan debt in the U.S. is about $1 trillion.

Also see: Obama's Déjà Vu Moment on Student Loans

 

"What we put forward today was a perfectly sensible solution to help address the problem," said Senator Patty Murray, D-Wash in a statement on Friday. Murray said the Democratic bill would have saved 7 million college students with Stafford loans from rate increases. "It seems like a no-brainer to me, but apparently not to Republicans."

"I cannot understand why we're having a problem with this," Senate Majority Leader Harry Reid (D-NV) told reporters after the vote.

Reid stated before last week's vote that he has no interest in compromise while House Republicans accused Senate Democrats of obstructing their own bill.

Also see: The Sequester and Student Loan Cuts: A Scorecard

"The Senate has a chance to do the right thing and advance a similar plan, opening the door for bipartisan negotiation and agreement," said Rep. John Kline (R-MN) last week, who co-sponsored a bill with Virginia Fox (R-NC) . "However, Senate Majority Leader Harry Reid seems to have drawn a line in the sand, telling the public he's 'not looking for a compromise' and only wants another temporary fix."

Also see: Private Lenders Should Take the Lead on Student Loan Refi, says CFPB

"Students and families deserve better from their elected representatives," said Kline, chair of the House Education and Workforce committee. "We have a responsibility to seek common ground and advance lasting solutions on their behalf. President Obama should urge Senator Reid to reconsider his position and join House efforts to advance a responsible plan that serves the best interests of borrowers and taxpayers."

When asked for a road map detailing the route a student loan bill is likely to take through Congress between now and July 1, Senator Reid's Washington, D.C. spokesperson Kenya James declined to comment. But barring an unexpected turn, a Congressional decision is likely to go down to the wire as it did last year. Rep. Kline drafted more than one version of the bill in 2012, but the final deal was hammered out by House Speaker John Boehner. Kline and other committee chairs were cut out of the negotiation.

--Written by John Sandman for MainStreet

Also see: Will Student Loan Interest Rates Double?

 

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