A bipartisan group of senators on Thursday will propose a compromise bill on student loan rates — a bid to end a stalemate that, if unresolved, would allow rates to double on Monday.
The proposal from three Republicans and Sens. Joe Manchin, West Virginia Democrat, and Angus King, Maine independent, would tie rates to Treasury notes — a method preferred by House Republicans — while locking in rates for the length of the loan, an aspect that President Obama supports.
SEE RELATED: Senate Democrats under pressure in student loans battle
Senate Majority Leader Harry Reid had signaled Wednesday the chamber is nowhere close to striking a deal before subsidized Stafford loans expire and jump from 3.4 percent to 6.8 percent. House Republicans are pressuring Senate Democrats to act.
The House has already passed a measure that would tie the rates to Treasury notes, a solution that dovetails with President Obama’s.
The new Senate proposal would set newly issued loans at the Treasury 10-year borrowing rate, plus 1.85 percent for subsidized and unsubsidized Stafford loans among undergraduates; plus 3.4 percent for Stafford loans among graduate students; and plus 4.4 percent for PLUS loans.
“This bipartisan agreement not only makes sure student rates will not double on July 1, but this is a long-term fix that will lower rates for all students and will save students $30 billion over the next three years, making sure anyone who wants an education, can afford one,” Mr. Manchin said.
However, several Democratic senators have said they want to extend existing rates until debate next year on the Higher Education Act. It is unclear if the new proposal, which maintains the cap on consolidate loans at 8.25 percent, will garner support from enough Democrats.
“There is no deal on student loans that can pass the Senate because Republicans continue to insist that we reduce the deficit on the backs of students and middle-class families, instead of closing tax loopholes for the wealthiest Americans and big corporations,” Reid spokesman Adam Jentleson said. “Democrats continue to work in good faith to reach a compromise but Republicans refuse to give on this critical point.”
A spokesman for Senate Minority Leader Mitch McConnell, Kentucky Republican, said chamber Democrats are holding up the process by flouting their leader in the White House.
“As a result of their obstruction, interest rates on some new student loans will increase next week,” spokesman Don Stewart said, adding: “Why Senate Democrats continue to attack the president’s plan is a mystery to me, but I hope he’s able to persuade them to join our bipartisan effort to assist students.”
Mr. Obama, who traveled to Africa on Wednesday, has said he would veto the House’s version because it does not lock in rates for the life of the loan.