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 firstname.lastname@example.org.