WASHINGTON — Interest rates on new student loans were heading higher after senators on Thursday failed to advance proposals to keep them from doubling come July 1.
Dueling measures in the Senate would have kept interest rates on some student loans from moving from 3.4 percent to 6.8 percent, although the Republican and Democratic proposals failed to win 60 votes needed on procedural votes. The failure means students are likely to face higher rates on new subsidized Stafford student loans this fall but enjoy greater certainty on interest they will be expected to pay of the life of their loans.
The failure comes with just three weeks before interest rates increase on those loans go back to 2008 levels. For students who max out their student loans, the rate shift means a $1,000 increase each year.
“On July 1, interest rates will double for the most vulnerable students in our society,” said Sen. Jack Reed, D-R.I.
Reed led Democrats’ unsuccessful push for a two-year extension of the current rates while lawmakers write a comprehensive overhaul of the student loan process. He did not keep Democrats together in a unified bloc.
Sen. Joe Manchin, D-W.Va., voted against both parties’ proposals. Aides said he wanted lawmakers to seek a comprehensive overhaul in the next three weeks, not the next two years.
Others, such as Sen. Richard Burr, R-N.C., also urged lawmakers not to treat Thursday’s votes as the final word on interest rates.
“If you believe that it’s appropriate for Congress to pick winners and losers then support this bill,” Burr said of Democrats’ two-year extension.
“If you believe that that’s not the congressional role and that we need a long-term, permanent, transparent, predictable solution then vote against this bill and let’s sit down between now and July 1 and write a bipartisan approach that solves this problems once and for all,” he said.
The Republican-led House already has passed legislation that would link students’ interest rates to financial markets. The House plan would reset interest rates every year but include a cap on interest rates facing students.
President Barack Obama threatened to veto that legislation.
Senate Republicans introduced a similar plan that would fix the interest rate once students took the loans. It was similar to one President Barack Obama included in his budget proposal.
Sen. Lamar Alexander, the top Republican on the Senate education committee, said failure of the GOP proposal in the Senate was indicative of partisanship trumping policy in Washington.
“If we can’t agree on this, we can’t agree on anything,” said Alexander, R-Tenn. “This is a manufactured crisis.”
Lawmakers last year passed a one-year extension of the interest rates in the middle of the presidential campaign. But now, there seems a lack of consensus with little more than three weeks before interest rates increase.
The chairmen and ranking members from both chambers’ education committees were looking to pass measures quickly and then resolve differences later. With Thursday’s failure, it seemed that route was narrower for now.
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