Senate Democrats hate it. The White House said it would veto it. And yet, the House passed a student loan bill Thursday, increasing the pressure on Democrats to move their own bill.
According to a senior Democratic aide, the timing of Senate floor debate on its student loan bill depends largely on the other legislative items on the calendar. The Democratic student loan alternative, introduced last week by Health, Education, Labor and Pensions Chairman Tom Harkin, D-Iowa and Sen. Jack Reed, D-R.I., could be offered as an amendment to the farm bill when the Senate returns from Memorial Day recess. If it's not, or the Senate does not wrap work on the farm bill before moving to immigration legislation, leaders could move to advance the student loan measure as a stand-alone after immigration.
As we reported earlier today, Senate Majority Leader Harry Reid, D-Nev., does not want to push for any bill that might be deemed controversial before immigration is brought to the floor. There currently is a delicate bipartisan balance to the immigration effort and Democratic leaders do not want unrelated, outside issues to thwart what likely would be the signature legislation of this Congress and President Barack Obama's second term.
But Reid also may not have much of a choice, considering Congress must act before the Fourth of July recess or student loan interest rates will double.
The key difference between the House and Senate student loan bills is that the House bill does not lock in interest rates for loans at the level when the loan is acquired. As it stands, students take out loans for each individual year of education, all subject to different rates.
For a smart look at the House measure, non-partisan estimates of its cost and the administration's objections to savings from student loans being used to reduce the deficit, read more from our CQ colleague Lauren Smith:
The House measure would peg the interest rate for the subsidized and unsubsidized portions of the Stafford federal student loan to the 10-year Treasury rate plus 2.5 percent. It would also shift loans for graduate students to the 10-year Treasury rate plus 4.5 percent. Those rates would be capped at 8.5 percent and 10.5 percent, respectively.
The bill would reset the interest rates each year and allow them to fluctuate with the market, unlike the president’s proposal, which would set the interest rates each year based on the Treasury’s actual cost of borrowing and then fix it for the life of the loan.
In his budget, the president proposed to shift the subsidized portion of the Stafford loan to 0.93 percent above the 10-year Treasury note and the unsubsidized portion of the Stafford loan at 2.93 percent above the 10-year Treasury note. It would modify the loan for graduate students to 3.93 percent above the 10-year Treasury note. The administration’s proposal does not include a cap.
According to the Congressional Budget Office, the House bill would save the federal government $990 million over five years and $3.7 billion over 10 years. But the White House statement issued Wednesday noted that “the administration believes that student loan interest rates should not be raised to reduce the deficit.”
The statement also noted that the House measure lacks the president’s proposal to extend various repayment options to borrowers who have already left school.