The student-loan stalemate is all but over.
After Republican and Democratic senators reached an agreement on student loans a week ago today, the Senate passed its bipartisan deal Wednesday evening 81-18.
The Democratic caucus was split, with 17 of the “no” votes coming from Democrats.
“It’s not the best we can do with respect to students and families,” Sen. Jack Reed, D-R.I., said on the Senate floor before the vote. Reed spearheaded a Democratic plan to temporarily lower rates to 3.4 percent, an effort that ultimately failed as Republicans and a handful of Democrats preferred a longer-term fix.
Senate passage all but ends Washington’s summer dispute over how to address student-loan rates, which doubled automatically. Interest rates on subsidized undergraduate loans jumped from 3.4 percent to 6.8 percent on July 1.
Under the deal, student-loan rates would be tied to 10-year Treasury notes. The bill is predicted to keep rates mostly steady through the 2015 school year.
This year, newly issued subsidized undergraduate loans would be lowered from 6.8 percent to 3.86 percent. (The rates will apply retroactively to loans issued after rates doubled on July 1.) New loans for graduate students would carry 5.41 percent rates, and PLUS loans for grad students and parents of undergrad students would carry 6.41-percent rates. The loans themselves would carry fixed rates, but new loans would start at different rates in coming years. Interest rates are expected to rise as the economy improves.
The deal will affect 11 million students who take out loans annually, the White House and lawmakers have said.
Loan rates will be capped in the future, a concession Democrats insisted on. Undergraduate loans will not be allowed to rise past 8.25 percent; graduate loans, 9.5 percent; PLUS loans, 10.5 percent.
The House is expected to pass the deal next week, according to a senior House Republican leadership aide. Speaker John Boehner, R-Ohio, indicated last week that Republicans in his chamber would support it. He praised the Senate for its vote Wednesday night.
“I’m pleased that Senate Democrats finally joined Republicans to pass a bill to provide a permanent, market-based solution on student loans. This bipartisan agreement is a victory for students, for parents, and for our economy, and it is consistent with the House Republican bill passed in May,” Boehner said in a statement released by his office.
For months, Senate Democratic leaders had sought a temporary, one- or two-year fix that would keep rates constant, while some Senate Democrats joined with Republicans for a longer-term fix that did not include hard caps on interest rates. Last week a bipartisan group led by Sens. Joe Manchin, D-W.Va., and Richard Burr, R-N.C., reached the agreement just passed.
The Senate’s vote concluded months of partisan stalemate and supplied a rare example of bipartisan deal-making on Capitol Hill.