Senate deals a blow to college students’ hopes of keeping student loan interest rates low

Here and Now

College students who hoped that their student loan interest rates would stay low lost a battle on Tuesday.

Republican refused to allow debate of a Democrat-backed bill that would have stopped the rates planned doubling this summer. Republicans say it’s not because they’re in favor of increasing the student loan rates on new, federally-subsidized Stafford loans, but rather because they’re opposed to how the Democrats want to pay for it.

Kathleen Hunter, Bloomberg News’ Congress correspondent, said today’s vote is unsurprising. The legislation will cost $6 billion for a one-year extension, and has been hotly debated for more than a year.

“Democrats in the Senate and Republicans in the House can’t seem to agree over a way to pay for the one-year freeze,” Hunter said. “What we saw today was no Republican support for the Democratic proposal.”

Democrats called for raising payroll taxes on certain high-income stockholders of private companies. The bill had little chance of passing the Republican-controlled House, so the loss was largely symbolic. Republicans have their own proposal, passed in the House last week, that would fund keeping the lower interest rates with reductions in healthcare funding.

Hunter said now the real negotiations will begin on getting a bill that both sides can support — by July 1.

The low rate freeze has been in effect for a number of years, keeping rates about 3.4 percent. They’d rise to about 6.8 percent if the freeze is lifted.

“What brought this all to a head on Capitol Hill is, President Obama at the end of last month, went on a three-state, battleground state, tour of college campuses, where he talked about the need to keep the 3.4 percent interest rate on student loans,” Hunter said. “That lit a fire under Democrats on Capitol Hill who started talking about bringing up a proposal to keep that lower rate in place.”

A few days later, Republicans in the House introduced their own proposal for keeping loan rates low.

“I think Republicans see what Democrats are doing, in terms of the timing of bringing this up. It’s certainly an attempt by Democrats to appeal to younger voters, who came out … for President Obama in 2008,” Hunter said.

But for all the disagreements between Republicans and Democrats, Hunter sees room for hope among students who will be taking out new loans next year.

“I don’t think that this is something Democrats want to see go unresolved,” she said.

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