The Senate voted 81-18 Wednesday for legislation on student loan rates, splitting Democrats in the chamber.
Seventeen Democrats voted against the bipartisan bill that would cap most student loan rates at 8.25 percent.
“I cannot support a plan that raises interest rates in the long-term while the federal government profits off them,” Sen. Elizabeth Warren (D-Mass.) said. “This is obscene. Students should not be used to generate profits for the government.”
The Senate added the Bipartisan Student Loan Certainty Act, S. 1334, as an amendment, which retroactively sets student loan rates to the 10-year Treasury note, plus 2.05 percent for undergraduate loans. The amendment from Sens. Joe Manchin (D-W.Va.) and Richard Burr (R-N.C.) also caps undergraduate loan rates at 8.25 percent. That amendment, crucial to final passage, passed on a voice vote.
President Obama’s administration "strongly supports" the deal, and he is expected to sign the bill if it reaches his desk.
On July 1, need-based student loan rates doubled from 3.4 percent to 6.8 percent.
“The interest rate for undergraduate students goes down almost 3 percent from 6.8 percent for 3.8 percent,” Sen. Dick Durbin (D-Ill.) said ahead of the vote. “As interest rates go up, so will student loan rates, but we put a cap on it. … This is a better outcome.”
Several Democratic senators opposed the Senate bill, despite the fact that Senate Health, Education, Labor and Pensions Committee Chairman Tom Harkin (D-Iowa) supported it.
“Not only does this legislation raise long-term loan rates for students, it fails to close tax loopholes and does not ask the wealthy to pay their fair share,” Sen. Tammy Baldwin (D-Wis.) said. “It does not ask our country to invest in the future, nor does it offer a comprehensive solution to college affordability. Rather, it offers a shabby permanent fix and slaps students and their families with the bill.”
Warren, along with Sens. Jack Reed (D-R.I.) and Bernie Sanders (I-Vt.) argued that they could not support the bill because it “profits off the backs of students.”
According to the Congressional Budget Office, the Senate bill generates $184 billion in profit over 10 years for the government — roughly the same amount as if the 6.8 percent rate remained in place.
Supporters of the bipartisan deal argue that rates will remain below the current 6.8 percent rate for at least the first three years of implementation, while opponents argued rates for future students would be much higher.
“Interest rates are going to go up, and in fact, it will be harder for families to send their kids to college,” Sanders said ahead of the vote. “It is a dumb idea. We’ve got to get out of the business of making profits off struggling families.”
Under the Senate bill, graduate students and loans taken out by parents on behalf of their children, would also have rates tied to 10-year Treasury bonds, and receive caps of 9.25 percent and 10.5 percent, respectively. Graduate loans would be set to Treasury bond rates plus 3.6 percent, and the so-called PLUS loans for parents would be equal to that rate plus 4.6 percent.
Before the Senate passed the bill with the Manchin-Burr amendment, it rejected a Reed-Warren amendment and a Sanders amendment — all votes were held to a 60-vote threshold.
The Reed-Warren amendment would have changed the maximum loan cap from 8.25 percent to 6.8 percent so that rates couldn’t get higher than they are now. But their amendment was rejected on a 46-53 vote, most likely because it was paid for with a “small surcharge” on millionaires — a .55 percent tax increase on those earning more than $1 million a year.
“We can do better,” Reed said ahead of the vote. “We want to protect students from these high interest rates. … We should ensure that this new rate law does not leave students worse off.”
Sanders’ amendment, which failed on a 34-65 vote, would have sunset the bill after two years so that lawmakers would have to renew or renegotiate a deal. Sanders said without his amendment, the bill is a “disaster” because the Congressional Budget Office estimates that rising interest rates will result in higher student loan rates.
“The very sad truth of the matter is that, in a number of ways, our government — Congress, the White House — is failing young Americans today,” Sanders said. “Our goal must be that the youth of this country are able to get decent jobs or, if they choose to go to college, to be able to afford to go to college.”
Democrats argued that Congress should be doing more to address the rising costs of tuition and refinancing the already $1 trillion in student loan debt that’s been issued. The Senate is expected to reauthorize the Higher Education Act next year.
“This is not the end of the conversation. It’s really the beginning," Harkin said. “It’s just one part of the jigsaw puzzle that is college affordability.”
Harkin promised to revisit student loan rates in the Higher Education Reauthorization in addition to rising college costs. Part of the Senate student loan bill requires the Government Accountability Office to report on the true cost to the government of operating the program. Harkin said he would use the report to ensure that the federal government no longer generates revenue from student loans.
Sen. Barbara Boxer (D-Calif.) said she didn’t think Republicans would have any incentive to revisit the issue of student loans if this bill becomes law.
“Don’t kid yourself … this is a permanent deal,” Boxer said. “They’re not going to revisit this issue.”