Blumenthal pointed out that student loan rates are higher than the borrowing rate for large banks. Lawmaker missed the July 1 deadline to prevent need-based student loan rates from doubling from 3.4 percent to 6.8 percent.
Blumenthal said doing nothing about student loan rates would have serious economic implications for the country because most U.S. jobs require some higher education.
“It seems to me like one of the most effective measures we could take to promote job growth is to increase access to higher education," Blumenthal said. "At the very least, we should not be actively hindering this access by allowing rates to increase.”
Democrats argue that given one more year, lawmakers would have time to address the drivers of tuition increases and the $1 trillion of existing student loan debt in reauthorization of the Higher Education Act.
Sens. Joe Manchin (D-W.Va.), Richard Burr (R-N.C.), Tom Coburn (R-Okla.), Lamar Alexander (R-Tenn.), Angus King (I-Maine) and Tom Carper (D-Dele.) introduced a bipartisan bill similar to what House Republicans passed last month. The Bipartisan Student Loan Certainty Act requires all newly issued student loans be set to the U.S. Treasury 10-year borrowing rate plus 1.85 percent for undergraduate loans. The cap on interest rates for consolidated loans would be 8.25 percent.
Manchin said he wasn't confident that the Senate could agree on a larger higher education bill by next year. He also said his student loan bill was better because it's a permanent fix for all students not just a one-year extension for the poorest 40 percent.
"Under our proposal everything is 3.66 percent next year," Manchin said Tuesday. "It could go up, you could have inflation."
But most Democrats have said that plan is worse than doing nothing because there is no loan rate interest cap, meaning rates could grow higher than 6.8 percent.
“Proposals that have low ‘teaser rates’ but will only result in high rates down the road will harm our nation's economy and only exacerbate the problems that we face.”
Blumenthal cosponsored a bill with Sen. Elizabeth Warren (D-Mass.) that would have allowed students to take advantage of the low interest rates that banks get, but measure hasn't gotten a vote.