(MCT) WASHINGTON — With student loan rates set to double in about four weeks, competing proposals to prevent the increase were defeated in back-to-back Senate votes Thursday, leaving the issue unresolved.
The failed measures leave lawmakers snarled in a familiar debate that has divided the parties, but has not attracted the attention it did a year ago when it became part of the presidential campaign.
The House voted last month on a proposal that would tie interest rates for Stafford loans to the Treasury’s 10-year borrowing rates, which its Republican sponsors said was in line with principles outlined by the Obama administration. Based on current forecasts, the interest rate for both subsidized and unsubsidized Stafford loans would be 5 percent next year. The proposal would cap such loans at 8.5 percent.
The White House, however, offered its own plan that differs slightly by locking in that variable rate for the duration of the loan, rather than allowing it to reset each year. The plan would not place a ceiling on rates, but would continue to allow college graduates to repay loans as a percentage of their overall income. For a subsidized Stafford loan, the rate in 2014 would be 3.4 percent.
President Barack Obama, in a Rose Garden event last week, said the plan passed by House Republicans would also eliminate safeguards for low-income families.
The two Senate proposals took different approaches. The Democratic version would have extended the current rates for two years.
The Republican one would have tied the interest rates of all newly issued federal student loans, not simply Stafford loans, to Treasury rates. It would also, like the president’s plan, lock in that interest rate for the life of the loan. Under that plan, interest rates for all loans would be 5.5 percent next year.
The Democratic plan received 51 votes, nine short of the threshold needed; the Republican plan received 40 votes.
In 2012, as student borrowers faced the same increase in rates, Obama campaigned on the issue, urging Congress to extend lower rates as he appeared in college towns in key states. Congress ultimately voted to pass the one-year extension. Now, without new action by July 1, interest rates on subsidized Stafford loans will double from 3.4 percent to 6.8 percent.
Thursday’s votes were seen as political moves, with neither expected to pass.
“This is like the opening act at the circus,” said Sen. Lamar Alexander, R-Tenn., a co-sponsor of the GOP bill. “Hopefully the main event will attract some senators who are willing to conduct this in a grown-up way.”
Sen. Patty Murray, D-Wash., called the result “another example of how out of step Republicans in Congress are with the struggles of all of our American families today.”
The House and Senate have three full weeks to agree on a compromise before they adjourn for recess.
The White House, which supported the Senate Democratic plan, said in a statement that it is willing to work with lawmakers on a long-term solution.
©2013 Tribune Co.