Dueling groups of senators unveiled plans Thursday to prevent the increase in student loan rates which is set to take place on July 1, but it is unlikely any plan will be enacted before the Senate heads leaves for their week-long recess on Friday.
A bipartisan group of senators-Joe Manchin, D-W.Va., Angus King, I-Maine, Tom Coburn, R-Okla., Richard Burr, R-N.C., and Lamar Alexander, R-Tenn.- introduced the "Bipartisan Student Loan Certainty Act," which would tie the interest rates on student loans to the 10-year Treasury note and adds an additional 1.85 percent to subsidized and unsubsidized undergraduate Stafford loans. The proposal adds 3.4 percent to the Treasury rate for graduate Stafford loans and 4.4 percent for PLUS loans, which are issued to parents of students.
"We're tired of this being a political football," Burr said in a news conference with the co-sponsors of the bill. "This is a responsible program from the standpoint of the American taxpayer."
"We're helping every student that needs a loan," Manchin said. "This piece of legislation fixes all categories."
The plan would fix the interest rate for the life of the loan, and it also maintains a cap on interest rates for consolidated loans at 8.25 percent. It reduces the deficit by $1 billion over 10 years, according to the Congressional Budget Office.
For weeks, Republican leaders in the House had hounded Democrats for their failure to approve an alternative proposal that would address the impending rate hike. The Republican proposal, which was modeled after a plan Obama included in his 2013 budget, also set interest rates to the 10-year Treasury note but tacked on a higher 2.5 percent "add on" to those rates. The proposal allowed rates to fluctuate according to the market throughout the life of the loan, which Democrats and Obama strongly opposed.
Save for calling on Congress to prevent interest rates from doubling on July 1, the Obama administration has not publicly said how it would like the issue resolved.
A spokesman for Senate Majority Leader Harry Reid indicated Wednesday that the bill would not pass the Senate.
"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. "Democrats continue to work in good faith to reach a compromise, but Republicans refuse to give on this critical point."
But a second group of Democratic Senators are planning to offer a separate plan called the "Keep Student Loans Affordable Act," which would extend the current rate of 3.4 percent for one year, allowing the Senate to work on a long-term solution over the next year.
"The proposals that are on the table today would leave students worse off in the future frankly, worse off than simply allowing the interest rates to double," Sen. Jack Reed, D-R.I., said on the Senate Floor Thursday. "We have to take action to stop the interest rates from doubling. Student loan debt is the next big financial crisis facing this country."
The Democratic plan is sponsored by Sens. Reed, Kay Hagan, D-N.C., Tom Harkin, D-Iowa, Al Franken, D-Minn., Elizabeth Warren, D-Mass., and Debbie Stabenow, D-Mich.
But as the Senate's week-long July 4 recess approaches, it is highly unlikely any plan will be enacted, meaning the Senate will have to come back after recess and try to retroactively pass a plan.