As Standoff Continues, Student-Loan Fix Fails in Senate

PHOTO: Interns from around the city protest near the Senate steps to urge the Senate to act on a House passed bill, Smarter Solutions for Students Act, which would prevent student loan interest rates from doubling.

Interest rates on subsidized student loans have doubled, but Congress has shown no signs that it will send a fix to the president's desk any time soon after it failed to pass a bill today.

Republicans and Democrats have yet to reach agreement on what to do about the higher new student loan rates, which kicked in last week as lawmakers spent their 4th of July recess barbecuing, attending parades, and meeting with constituents in their home states and districts.

Stafford loans' original interest rate was 6.8 percent, but in recent years the government subsidized those rates for low-income students, holding them to 3.4 percent. Now they've returned to 6.8 percent.

Today, Senate Democrats failed to advance a one-year, retroactive fix that would keep rates at 3.4 percent on loans made from July 1, 2013, to June 30, 2014.

The procedural vote was 51-49 in favor of moving the Democrat-supported bill forward. It needed 60 votes to advance.

The Senate continued to debate student loans Wednesday afternoon. Following the vote, Sen. Tom Udall, D-N.M., took to the floor to express disappointment.

"Today, we failed, and the nation's students pay the cost of that failure," Udall said.

The bill was unlikely to advance, as three Democrats have joined with Republicans to support the competing, GOP-backed bill—a long-term fix that would tie loan rates to 10-year Treasury bonds but would not cap interest rates for new loans, a point Democratic leaders oppose. The GOP-backed bill does cap consolidated loans at 8.25 percent interest in future years.

Republicans have criticized the idea of only lowering rates for one year.

"We'd be back here next year like groundhog day trying to fix this problem again," Sen. Kelly Ayotte, R-N.H., said on the floor after the vote.

The GOP-backed plan has gained support from a handful of Democrats -- Sens. Joe Manchin, D-W.Va. and Tom Carper, D-Del.; and Angus King, I-Maine, who caucuses with Democrats. It was unlikely that the one-year fix would advance Wednesday, without those senators on board.

Manchin and King voted against moving forward on that plan. Carper voted in favor of it.

On Tuesday, Senate Majority Leader Harry Reid, D-Nev., hammered Republicans for opposing the one-year plan.

"We have shown a willingness to compromise, but it is time for Republicans to do the same. A compromise isn't something that you just take whatever the other side offers you," Reid said at his weekly press conference.

For Reid and other Democrats who support the one-year fix, caps are the main sticking point with the Republicans' plan. Democrats have insisted that rates must not be allowed to rise in the future on newly issued loans. Under the GOP plan, loans would carry fixed rates, but rates for new loans could fluctuate.

"All the [Republican] proposals, within two years -- at the outside, three years, makes the rate more than 6.8 percent," Reid said on Tuesday.

House Republicans have passed a plan that also does not cap future loan rates. House Speaker John Boehner this week criticized Democrats for failing to act. Reacting to the Senate vote, House Education and the Workforce Chairman John Kline, R-Minn., echoed that criticism.

"The stubbornness of Senate Democrat leadership is astonishing. We have a near perfect opportunity for bipartisan, bicameral agreement on an issue affecting students and their families, yet Majority Leader Reid continues to force action on a shortsighted plan that is completely out of touch with the priorities of the White House and the American public," Kline said in a statement released by his office.

Debating loans this week, Republicans said one year of lower rates isn't long enough.

At their own weekly press conference Tuesday, Republican leaders likened the Democratic bill to the annual "doc fix," which Congress has passed each year to prevent a drop in reimbursement rates for doctors who treat Medicare patients.

"I think many of the Democratic senators have been busy with immigration and haven't had a chance to really read the bill," said Sen. Lamar Alexander, R-Tenn., a former Education secretary who has been working with Democrats on the GOP-supported bill.

"My hope is that as the Democratic senators look at the bipartisan proposal, they won't want to leave those 7 million students in middle-income families paying a 6.8 percent rate when they could be paying 3.6," Alexander said at Republicans' weekly press conference on Tuesday.

After the failure of Democrats' one-year fix, Ayotte pressed for a vote on the plan backed by Republicans and the three Democrats. On Tuesday, Carper, a Democrat who supports that plan, asked for the same.

So far, Democratic leaders have not scheduled a vote on the GOP plan, as the standoff continues.

ABC's John Parkinson contributed to this report.

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