Senate likely to miss loan deadline

The Senate is expected to miss the July 1 deadline for passing legislation that would prevent student loan rates from doubling.

Senators aren't giving up on the issue, however, and hope to come back after the July 4 recess and pass a bipartisan proposal that takes effect retroactively.

ADVERTISEMENT
Democratic Sens. Angus King (I-Maine) and Joe Manchin (D-W.Va.), along with Republican Sens. Lamar Alexander (R-Tenn.), Richard Burr (R-N.C.) and Tom Coburn (R-Okla.), have been working with White House officials on a student loan proposal that they hope can pass the Senate and then be considered by the House.

Senate aides agreed it seems unlikely this proposal could pass the upper chamber this week, given the effort to finish work on the immigration bill by Friday.

The bipartisan group is also still waiting for the Congressional Budget Office (CBO) to score the latest version of their bill. Several aides said a CBO score could come back as early as Tuesday.

But the bill might have to be further tweaked depending on the score, which might require more time and make it more likely that it won't be ready until July.

The bill sent in to be scored by the CBO would make the rate for federally subsidized student loans equal to the rate of the 10-year Treasury note plus about 1.9 percent. That's very similar to the House-passed bill, which sets the rate at the 10-year note plus 2.5 percent.

The House-passed bill could prompt rates to rise to around 5 percent in a few years, compared to the current 3.4 percent rate. But the House bill would cap rates at 8.5 percent, while the latest Senate plan has no cap.

The similarities between the House bill and the draft Senate bill would seem to vindicate House Republicans. GOP leaders have said their bill is based on a proposal from the Obama administration, and is something Senate Democrats should be able to use as a starting point.

Senate Democrats and the Obama administration initially rejected the House GOP bill, even though the Senate now seems close to a bill with a similar format. Today, a House GOP aide suggested the Senate try again to pass the House bill because it has run out of time.

"The House passed a bill to stop student loan rates from doubling weeks ago, which echoed the president's own proposal," this aide said. "Yet, the Senate has recklessly failed to act, endangering the education and income of so many vulnerable students and their families."

Assuming the bipartisan Senate group can finalize a proposal, that does not guarantee it can be quickly passed by the Senate. Some senators, like Sen. Elizabeth Warren (D-Mass.), have pushed for legislation that would lower the interest rate on student loans far below the current 3.4 percent rate, and could end up opposing the bipartisan plan.

That opposition could set up a series of cloture votes that would take time to work through — time the Senate doesn't have this week. A House aide agreed that aside from just process, there is still significant disagreement over what the bill should look like.

"There are bipartisan talks on the Senate side that could produce a bill that could pass through Senate quickly and turned around over here just as rapidly," he said. "The political hurdles are still far more formidable at this point than the logistical ones."

Without congressional action, the interest rate on subsidized student loans will double from 3.4 to 6.8 percent on July 1. The final Senate bill that passes in July would likely include language making the change retroactively to July 1.

One Senate aide said it is not critical to change the law by the July 1 deadline, because students typically don't start taking out loans until August.

Last year, Congress passed a bill extending the lower 3.4 percent rate just before the July 1 deadline, but still had to pass a separate bill delaying new loans for a week while the legislation was being prepared for President Obama's signature into law.

— This story was updated at 1:09 p.m.