WASHINGTON — A compromise to keep student loan interest rates low proved unwinnable before Monday's deadline and interest rates on new loans are going to double — at least for a while — senators said Thursday.
Sen. Tom Harkin, the chairman of the Senate education panel, said none of the proposals being circulating among lawmakers could win passage, and he urged lawmakers to extend the current rates for another year when they return from the July 4 recess. Harkin said his colleagues could retroactively lower the rates when they return from the holiday.
"Let's put this off for a year," Harkin, D-Iowa, told reporters.
Interest rates on new subsidized Stafford loans are set to go from 3.4 percent to 6.8 percent on Monday unless lawmakers take action. Congress' Joint Economic Committee estimates the increase will cost the average student $2,600.
"Neither party wants to see rates rise next week," said Sen. Richard Burr, R-N.C.
But a one-year rate extension isn't an acceptable option, either.
"Last year we kicked the can down the road and passed a one-year extension for only a small group of students. ... Why would we make the same mistake again and just kick the can down the road another year?" said Burr, who was among a group of senators who worked on a competing proposal with Sen. Joe Manchin, D-W.Va.
The Manchin-led proposal would link interest rates to the financial markets. It borrowed heavily from a version House Republicans passed earlier and from principles included in President Barack Obama's budget proposal.
"This agreement is very much like the proposal in the president's budget, it is very much like the proposal passed by the Republican House of Representatives and it will save billions of dollars in interest for all 11 million students taking out loans this year by dropping rates on all student loans," said Tennessee Sen. Lamar Alexander, the top Republican on the Senate Health, Education, Labor and Pensions Committee. "Some senators this afternoon are going to call for a short-term, political fix for just 40 percent of loans, but that's no fix at all when we have a plan to help all students that we can pass quickly."2 comments on this story
Nothing was happening — quickly or not — before July 1, meaning students who take loans would face higher rates. Senators were heading out of town without a deal, and Harkin said his colleagues would consider a retroactive fix on July 10.
"I think we are nowhere between now and July 1," said Rep. George Miller of California, the top Democrat on the House Education and the Workforce Committee. "It sounds to me like the Senate is going to leave town without dealing with this."
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