WASHINGTON — The Senate on Thursday failed to pass two bills that would have blocked increases in federal student loan rates, which are set to double July 1.
The Democrats’ bill would have kept interest rates where they are for the next two years to give Congress more time to negotiate student loans. Total student loan debt in the U.S. is about $1 trillion.
“What we put forward today was a perfectly sensible solution to help address the problem,” said Sen. Patty Murray, D-Wash. According to Murray, the Democratic bill would have protected 7 million college students 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 told reporters after the vote.
The top Republican on the Senate education panel seemed to share that frustration. “If we can’t agree on this, we can’t agree on anything,” said Sen. Lamar Alexander, R-Tenn. “This is a manufactured crisis.”
The Republican proposal would have stopped the doubling of loan interest rates and tied future rate hikes to market-based rates. Reid said the GOP measure would increase the burden on students by $13 billion or $14 billion.
The House has approved legislation similar to the Senate GOP bill, but the White House issued a statement saying the president would veto it. A news release from Republicans on the House education committee said the Democrats’ proposed two-year freeze would just mean that “borrowers will face another interest rate cliff in two short years.”
If the current rate expires, the immediate increase will be sharp, but it would return student loan interest rates to pre-2008 levels — and the original intent of the law.
When Democrats controlled Congress in 2007, they passed a law as part of their economic stimulus efforts to gradually lower the 6.8% fixed interest rate and then slowly let it rebound over a four-year period. Last year, Congress passed another extension of the lowered 3.4% rate because the economy is still recovering. It also became part of the presidential debate, which pressured Congress to act. President Obama campaigned against Republicans on loan rates in stops on college campuses as part of a broader effort to appeal to youth voters.
“Congress must act immediately to stop the imminent doubling of interest rates on student loans,” the White House said in a statement as the president was on his way to North Carolina to visit a school. Senators on both sides of the aisle said they are continuing discussions to see whether some kind of deal can be reached before the July 1 deadline.