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 Manchin (D-W.Va.) and Angus King (I-Maine). Both are sponsoring separate legislation backed by many Republicans that would peg student loan interest rates to the 10-year Treasury rate. 

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A third senator who backs the Manchin-King approach, Sen. Tom Carper (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 Reed (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 Alexander (R-Tenn.), Richard Burr (R-N.C.) and Tom Coburn (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 Warren (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.