Senate fails to move forward with lower student loan rates

The Senate on Wednesday failed to advance a bill backed by Democratic leaders that would keep student loan interest rates at 3.4 percent for another year. 

In a 51-49 vote, the Senate fell short of the 60 votes necessary to break a filibuster and proceed with the bill. 

Two senators that caucus with Democrats voted against the bill — Sens. Joe ManchinJoe ManchinOvernight Finance: Senate rejects funding bill as shutdown looms | Labor Dept. to probe Wells Fargo | Fed to ease stress test rules for small banks Overnight Energy: Judges scrutinize Obama climate rule Funding bill rejected as shutdown nears MORE (D-W.Va.) and Angus KingAngus KingWells CEO Stumpf resigns from Fed advisory panel Pentagon chief: 9/11 bill could be used against US troops GOP chairman: White House ‘running rogue’ on water rule MORE (I-Maine). Both are sponsoring separate legislation backed by many Republicans that would peg student loan interest rates to the 10-year Treasury rate. 

ADVERTISEMENT
A third senator who backs the Manchin-King approach, Sen. Tom CarperTom CarperOvernight Healthcare: McConnell unveils new Zika package | Manchin defends daughter on EpiPens | Bill includes M for opioid crisis Dems to GOP: Help us fix ObamaCare Overnight Finance: Trump promises millions of jobs | Obama taps Kasich to sell trade deal | Fed makes monetary policy video game | Trump vs. Ford MORE (D-Del.), voted with the rest of his party on Wednesday. 

Senate Majority Leader Harry Reid (D-Nev.) voted no as a procedural move so that he could bring the bill to the floor again at a later date.

Interest rates rose to 6.8 percent on July 1 after Congress failed to take action.

The latest developments leave it unclear whether lawmakers can reach a deal to lower the rates. 

The bill rejected on Wednesday would have extended the 3.4 percent rate for need-based loans for one year. Its cost was offset by ending a tax break on tax-deferred retirement accounts. Sen. Jack ReedJack ReedOvernight Finance: McConnell offers 'clean' funding bill | Dems pan proposal | Flint aid, internet measure not included | More heat for Wells Fargo | New concerns on investor visas Senate Dems call for investigation into Wells Fargo's wage practices Week ahead: Negotiators near deal on defense bill MORE (D-R.I.), the bill's sponsor, said that would generate around $4 billion. 

The House has approved legislation that is similar to the bipartisan bill backed by Manchin and King, and lower-chamber Republicans in recent days have raised pressure on the Senate to take action. 

The bipartisan bill would require 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.

Besides Manchin, King and Carper, Sens. Lamar AlexanderLamar AlexanderOvernight Regulation: Lawsuits pile up against Obama overtime rule The American people are restive, discouraged and sometimes suicidal GOP chairman eyes lame-duck for passing medical cures bill MORE (R-Tenn.), Richard BurrRichard BurrDem groups invest big in Bayh in Ind. Senate race The Trail 2016: Fight night Poll finds races for president, Senate tight in North Carolina MORE (R-N.C.) and Tom CoburnTom CoburnRyan calls out GOP in anti-poverty fight The Trail 2016: Words matter Ex-Sen. Coburn: I won’t challenge Trump, I’ll vote for him MORE (R-Okla.) are sponsors of that legislation.

Democrats say that bill would be worse than doing nothing because there is no direct cap to loan interest rates.

“If you can explain to me why these proposals that the Republican’s have are better than just having the rates double, please explain that to me,” Reid said Tuesday. “I think we should support a plan that would be better for students not worse for students.”

Sen. Elizabeth WarrenElizabeth WarrenOvernight Cybersecurity: FBI probes possible hack of Dems' phones | Trump's '400-pound hacker' | Pressure builds on Yahoo | Poll trolls run wild Wells Fargo board to decide on executive clawbacks Labor Department launches Wells Fargo review MORE (D-Mass.) said the differences between the two bills came down the a principle of whether the government should be “profiting off the backs of students.”

“Right now, the new loans are scheduled to produce $184 billion in profits for the U.S. government over the next 10 years,” Warren said Tuesday evening. “The Republicans have put forward a plan, and they’ve said in this plan that they want to be budget neutral so it produces $184 billion in profits for the United States government. … It’s not a fix — it’s just a different way to make $184 billion in profits off the backs of students.”

Burr said Warren’s characterization was “disingenuous.”

Reid said lawmakers are working on a possible compromise that could be brought to the floor later this month.