The student loan interest rate legislation approved Wednesday by the Senate appears to face a clear path in the House, where Republicans wasted no time pointing out that the proposal closely mirrors their original plan.
The office of House Speaker John A. Boehner, R-Ohio, blasted out an email before the Senate vote noting the similarities between the bipartisan Senate compromise and the House bill (HR 1911) passed in May. Both shift from a fixed interest rate to variable, market-based rates pegged to the 10-year Treasury note, similar to what President Barack Obama proposed in his fiscal 2014 budget.
“I’m pleased that Senate Democrats finally joined Republicans to pass a bill to provide a permanent, market-based solution on student loans,” Boehner said in a statement after the Senate vote. “The House will act expeditiously.”
A senior GOP leadership aide called the final agreement “not just a win for students and taxpayers, it’s also a policy and political win for House Republicans.”
Some Democrats in both chambers had pushed for Congress to pass another extension of the fixed 3.4 percent interest rate on the subsidized portion of the Stafford loan, which doubled to 6.8 percent July 1 because lawmakers did not act. When the Senate approved the bill 81-18 Wednesday, 16 Democrats and one independent voted no, despite the White House’s endorsement.
Rep. John Kline, R-Minn., co-author of the House bill and chairman of the Education and the Workforce Committee, applauded the Senate passage of the legislation.
“For more than a year, Republicans have been fighting for a long-term solution to the student loan interest rate problem, and I am pleased we finally have a Senate agreement worthy of public support,” Kline said. “The legislation approved today reflects the policies and priorities of the House-passed [bill]. I look forward to the bill’s swift passage in the House.”
Last summer, Congress passed a one-year extension (PL 112-141) of the fixed 3.4 percent interest rate after GOP presidential nominee Mitt Romney urged Republican lawmakers to go along amid heavy lobbying by Obama. Republicans made clear soon after that they had no appetite for another extension, particularly since the White House backed shifting to a variable interest rate in its budget in April.
Fast House Vote Expected
The Senate approved its compromise as a substitute amendment to the House bill. Kline said the new version of the bill could come to the House floor as early as Thursday under suspension of the rules, but it was unclear whether it has enough support to supply the required two-thirds majority.
“There might be votes to pass it under suspension,” Kline said. “I don’t know that.”
Aides familiar with the bill said the House vote is more likely to occur next week. Boehner is expected to provide more details on a timeline during his regular Thursday morning news conference.
“I would hope that we would take it up immediately,” said George Miller of California, the top Democrat on the Education and the Workforce Committee.
Miller said he expects the legislation to garner broad bipartisan support in the House, noting, “There’s not a better proposal on the table.”
The Senate compromise would base interest rates on the 10-year Treasury note, plus 2.05 percent for both the subsidized and unsubsidized portions of the undergraduate loans, 3.6 percent for graduate loans and 4.6 percent for PLUS loans.
The interest rates hinge on the 10-year Treasury note, but not the daily rate. Each year’s interest rates would be determined by the yield of the last 10-year Treasury auction prior to June — so all loan rates this year would be based off the 1.81 percent rate from May, not the current yield of 2.5 percent. The loan rates would be capped at 8.5 percent, 9.5 percent and 10.5 percent, respectively.
The Congressional Budget Office scored it as saving $715 million over 10 years.
The House bill passed in May would also link student loan interest rates to the 10-year Treasury note, with slightly different add-ons: plus 2.5 percent for the subsidized and unsubsidized portions of the undergraduate loan and 4.5 percent for graduate loans. Those rates would be capped at 8.5 percent and 10.5 percent, respectively.
The budget office scored that proposal as saving $3.7 billion over 10 years. The bill directed those savings to be used to pay down the deficit.
Lingering Democratic Divisions
The White House issued a veto threat on the House bill in May but threw its support behind the bipartisan Senate measure Wednesday in a Statement of Administration Policy that underscored the differences between the two.
“The Senate amendment does not contain the flaws that were in some of the previous legislative efforts to address this issue,” the statement said. “In particular, the amendment rejects a variable interest rate that resets every year, which would put students at risk of paying more over time. ... The amendment also rejects unfair and unwise approaches that would raise student loan interest rates to pay for deficit reduction.”
That wasn’t enough, however, to quell the opposition of a small group of Senate Democrats.
“Why are we producing a bill which is basically a Republican bill, very close to what the House Republicans passed?” asked Sen. Bernard Sanders, I-Vt., who caucuses with Democrats. “They say, ‘This is a pretty good bill and we’ll accept it.’ Well, if the most right-wing [House] in American history thinks this is a pretty good bill, I would hope Democrats would say ... ‘Well, maybe we can do better than that.’”
Senate Health, Education, Labor and Pensions Chairman Tom Harkin, D-Iowa, who voted for the bill but was vocal about his displeasure, noted, “Compromises are tough things sometimes.
“This wouldn’t have been the bill I would have written, but I think everyone involved in the negotiations would say the same thing,” Harkin said.