Federal Student Loan Rates Set to Double Monday
Federal student loan interest rates are set to double on Monday as the Senate continues to shut down various proposals that would prevent the rates from instantly doubling from 3.4 percent to 6.8 percent.
Earlier this month, we wrote about Senate Republicans defeating a bill that would keep the rates at 3.4 percent for another two years. Two days ago, Senate Major Leader Harry Reid shot down a new bipartisan proposal that would link the rate to market based indicators.
“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,” said Reid spokesman Adam Jentleson to the AP. “Democrats continue to work in good faith to reach a compromise but Republicans refuse to give on this critical point.”
Part of the 2007 stimulus bill included provisions to gradually lower the 6.8 percent interest rate to 3.4 percent over four-years. Congress passed an extension of the lowered rate last year. Democrats want to keep the interest rate artificially low for another two years — an option that Senate Republicans want no part of. Republicans want to tie the interest rate to market-based rates, which would keep the rates low for now but leaves room for drastic increases in the future. Democrats don’t want to go forward with a market-based approach without a lower cap on how high the interest rate can go. President Obama submitted a compromised plan that would cap rates at 8.25 percent earlier this year but most Reid shot that plan down this week.
“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,” said Don Stewart, a spokesman for Senate Minority Leader Mitch McConnell.
The Congressional Budget Office estimates that the low-at-first rates would rise to 6.8 percent for 2017 and increase to 7.2 percent the next year under the compromise proposal that was shutdown.
“Any proposal that lacks a cap is a nonstarter and indicates that its proponents are putting their ideology above students and their families,” said Allison Preiss, a spokeswoman for the Democratic-led Senate Health, Education, Labor and Pensions Committee that Sen. Tom Harkin leads to the Washington Post.
Lawmakers can still pass a bill on July 4 when they return from the holiday and still meet the July 1 deadline requirement. For now, though, it looks like we’re in deadlock and college students will begin to pay more for federal college loans starting next week.