Student Loans: Senate Fails to Pass Any Bill to Avoid Rates Doubling

Student Loans: Senate Fails to Pass Any Bill to Avoid Rates Doubling The U.S. Senate on Thursday was unable to reach agreement on rival legislation aimed at preventing the doubling of the interest rate on subsidized Stafford student loans. The deadline is July 1.
The defeat of the Democrat and Republican proposals will likely result in yet another showdown ahead of the deadline. Both parties agree that interest rates should not go up, a move that would deepen the estimated $1 trillion student loan debt. But they can’t agree on how to proceed.
A Republican plan to establish market-based rates tied to Treasury notes and a Democratic bill to extend the current lower rates for another two years each failed to get the 60 votes needed to advance.
“What we put forward today was a perfectly sensible solution to help address the problem,” said Sen. Patty Murray, D-Wash. According to Murray, the Democratic bill would have protected 7 million college students from rate increases. “It seems like a no-brainer to me, but apparently not to Republicans.”
The House has approved legislation similar to the Senate GOP bill, but President Obama has vowed to veto the bill that would create market-based rates. Democrats say such a move, even with proposed rate caps, would cost student borrowers even more than what they would pay if the rates were allow to double on July 1.
A news release from Republicans on the House education committee said the Democrats’ proposed two-year freeze of the Stafford loan rate at 3.4 percent would just mean that “borrowers will face another interest rate cliff in two short years.”
If the current rate expires, the immediate increase will be sharp, affecting more than 7 million student borrowers. But it would return student loan rates to pre-2008 levels.

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