By Ramsey Cox
The Senate on Thursday failed to move forward with two rival bills aimed at preventing an interest rate hike on student loans.
Both bills were subject to procedural votes in which 60 votes were needed to end debate.
A bill backed by Democrats that would extend existing interest rates on federally backed student loans failed 51 to 46, while a GOP alternative fell 40 to 57.
Interest rates will double on student loans from 3.4 percent to 6.8 percent in July without congressional action.
The Democratic bill sponsored by Sens. Jack Reed (D-R.I.) and Tom Harkin (D-Iowa) would have offset the cost of the lower rates by ending three tax breaks.
Specifically, it would limit the use of tax-deferred retirement accounts, restrict “earnings stripping” by expatriated entities and close an oil and gas industry tax break by treating oil from tar sands the same as other petroleum products.
The GOP bill sponsored by Sens. Tom Coburn (R-Okla.) and Lamar Alexander (R-Tenn.) would have required that all newly issued Stafford, Graduate PLUS, and Parent PLUS loans be set to the U.S. Treasury 10-year borrowing rate plus 3 percentage points. It would lower the interest rate for this coming school year for all newly issued federal student loans to a fixed rate of 4.75 percent, based on the May 15 auction rate of 1.75 percent.
Alexander said his bill was a permanent fix for all student loans rather than just a two-year extension for need-based loans.
The House passed a similar bill last month that Reid said was unacceptable.
“The Republican’s alternative proposal would be worse than doing nothing at all,” Reid said. “I hope my Republican colleagues will help invest in America’s future rather than once again sticking it to the students.”
Under the House bill, federal student loan rates would be set at the 10-year Treasury note rate plus 2.5 percent. The rate would be variable and would reset each year, although students could package all their loans into a fixed-rate loan after graduation. Like the Senate GOP bill, the House bill also caps the rate at 8.5 percent for consolidated student loans.
GOP lawmakers have pointed out that President Obama proposed a plan similar to the House bill in his 2014 budget.
“This is an issue ripe for bipartisan cooperation,” Senate Minority Leader Mitch McConnell (R-Ky.) said Thursday. “Both the president and Republicans want to prevent rates from going up in July. And the ideas Republicans have put forward on this issue are actually quite similar to what the president has already proposed. So this should’ve been a slam dunk.”
Obama has said he’d veto the House bill if it were to pass in the Senate.