Franken, Democrats try again to lock in student-loan interest rates

MinnPost photo by Devin Henry
A group of Democrats, including Sen. Al Franken, introduced a bill Thursday to delay the doubling of the 3.4 percent interest rate on federal subsidized loans for one year to give lawmakers time to come to a long-term deal.

WASHINGTON — Senate Democrats are trying again to delay a student-loan interest rate hike in lieu of a long-term deal on the matter.

A group of Democrats, including Sen. Al Franken, introduced a bill Thursday to delay the doubling of the 3.4 percent interest rate on federal subsidized loans for one year to give lawmakers time to come to a long-term deal.

Republicans and Democrats are fighting over whether to tie the interest rates to the financial markets, and at what rate, but will not be able to come to an agreement before their July 1 deadline.

Democrats say they want to hold off on a long-term fix until Congress reauthorizes federal higher education policy next year, warning that moving too quickly on major reform would force students to pay higher rates than they need to.

“We can’t make things worse for our students, and so we are talking about a one-year fix, and then working on longer-term solutions,” Franken said.

It’s highly unlikely Republicans will support this new plan.

The House passed a market-based plan in May, over objections from Democrats and the White House, and Minnesota Rep. John Kline, the chairman of the House Education Committee, has repeatedly said he opposes a short-term fix.

In the Senate, Republicans blocked a a two-year extension of the current rates on June 6 because Democrats closed tax loopholes to pay for the bill. They pay for the new legislation by requiring timely tax payments on inherited IRAs or 401(k)s.

The White House, even though it pitched a market-based plan of its own, backed the Senate’s short-term bill earlier this month, and senators said Thursday the administration supports this new plan.

Also Thursday, a second group of senators pitched what they said is a compromise plan, a bill setting the interest rate to that of federal borrowing, plus an additional 1.85 percent for subsidized and unsubsidized loans (House Republicans would add 2.5 percent, and the White House would add 0.93 percent). But Senate leadership shot down that plan as unfairly hiking rates to reduce the deficit, and the group appearing with Franken Thursday afternoon slammed it has even worse, in the long run, than letting the interest rates double under current law.

“We have not fully vetted what the long-term implications are,” Sen. Tom Harkin, the Democratic chairman of the Senate Education Committee, said.

Either way, Congress will almost certainly miss its July 1 deadline. The new bill is scheduled to receive a vote on July 10, Rhode Island Sen. Jack Reed said, after lawmakers return from their Fourth of July break, though the bill (and likely any long-term fix) would apply retroactively to July 1.

So, here’s where we stand: The Republican House passed its market-based plan last month, while the Senate voted down potential bills of its own a few weeks later. The House is now waiting for the Senate to come to some sort of compromise, and Republicans oppose any short-term fix like the one proposed by Franken and others today.

Interest rates will double, at least for a short time, on Monday.

Devin Henry can be reached at dhenry@minnpost.com.

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Comments (4)

  1. Submitted by Steven Bailey on 06/27/2013 - 08:14 pm.

    Dear Senator Franken

    Senator Franken, why are you so concerned about student loan rates which affect a very small portion of our population? Over 90% of people want GMO foods labeled so they can decide for themselves whether they would like to buy them or not, but you have no concern for them at all.

    • Submitted by mark wallek on 06/29/2013 - 08:46 am.

      Al is a senator now

      So self investment is the priority. Lack of accomplishment is a hallmark of modern government, but things do get done. Those things generally do not benefit the genuine human citizen.

  2. Submitted by mark wallek on 06/28/2013 - 09:16 am.

    A real bind

    The problem looks to be insurmountable. Educational institutions in America are now capitalized for profit. Laws in place forbidding bankruptcy are really working for the financial institutions. The debt is inescapable, and plays an important role in the new wage earners life: a millstone that hobbles independence, which contributes mightily to toeing the line. “Working out a solution” is such a farce when what we all know is going to happen is that the monied interests are going to continue to make money in this capitalized system. So Al will have to work both sides of the issue, but he’ll be making no real waves of change. Rather, he will be attempting to make it all palatable to all, which is self service more than serving the citizen. Capitalized education, with it’s emphasis on sports and profit has not produced better quality education. On the contrary, now we have garbage like Phoenix “University.” No, costs will continue to rise, more will be heavily in toady debt, quality will continue to erode. It’s unfortunate, but face it: America worships the getting, having and holding and spending of big sums much more than it values quality of life and engaged human congress.

  3. Submitted by Bill Hansen on 06/28/2013 - 02:08 pm.

    Educations costs tied to availability of money…

    Today there is little incentive for educational institutions to worry about costs. It’s a game with students, that all educational institutions care dearly about, just ask, and Washington falling all over itself to provide more financial support. Schools complain that they will have to raise costs, students complain about the raise, elected representatives make more funds available “for the children” and the cycle restarts. Schools get what they want, elected officials become heros, all with other peoples money. It’s easy to spend, and students get stuck with the loans. Now we want to reduce the expense of those loans so they can afford bigger loans due to increased costs of education……..Educational institutions, with the best interests of the students in mind, are basically swindling the taxpayers. Plain and simple. When Federal money starts to dry up costs will quit rising and schools will have to live within their means.

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