Student loan plan stalls before debate

WASHINGTON - Republicans in the U.S. Senate on Wednesday defeated a procedural vote on an effort to ease student loan interest rates, throwing the Democratic-led effort into chaos even as negotiations continue.

On a 51-49 vote, Senate Democratic leaders fell nine votes short of the 60 votes necessary to take up a bill that would keep new Stafford student loans at 3.4 percent for an additional year. The effort, sponsored by Iowa Democratic Sen. Tom Harkin, chairman of the Senate Health, Education, Labor and Pensions Committee, came after the Senate failed to act before a July 1 deadline that sent the rates doubling from the previous 3.4 percent to 6.8 percent.

Existing Stafford loans are unaffected.

Republican plan

Iowa GOP Sen. Chuck Grassley helped lead the charge against the Democratic effort, noting that the Republican-controlled House already passed a bill in May that mirrored the approach in President Barack Obama's own budget proposal, which tied interest rates to 10-year Treasury notes, plus an additional 2.5 percent.

Grassley argued that rates eventually would stabilize, giving students security, although he conceded they could change, at least in the short-term.

Like many Republicans, he said the government cannot afford to be too generous, given the current fiscal environment.

“Student rates are already subsidized. This is just a question of how much you're going to subsidize it,” he said.

Democrats have said the approach favored by Republicans and Obama would allow unreasonable rate increases and did not include a feasible rate cap to protect students. Otherwise, the two parties' approach to the situation is largely similar.

Harkin had championed the effort to keep the rates at the 3.4 percent level for the next year. He echoed Democratic leaders' argument that the Republican approach eventually would allow loan interest rates to double for students.

“A proposal without an interest rate cap on individual loans - while it may look enticing for the short-term - will leave ... students and their families vulnerable to sky-high interest rates, and would remove a protection that has been a part of the federal student loan program since its inception,” Harkin said.

Senate Majority Leader Harry Reid, D-Nev., cited statistics that the average U.S. college student now owes about $26,000 in loans upon graduation.

Like Harkin, he said a doubling of the rate would be inevitable. Yet Reid also said negotiations with Republicans still are progressing.

“Republicans are pushing a plan to balance the budget on the backs of struggling students,” Reid said. “(House) Speaker (John) Boehner says the House has acted and the ball is in the Senate's court. But Democrats can't support a plan that would be worse for students than doing nothing at all.”

In the House, Rep. Bruce Braley, D-Iowa, said there is little hope that Republican leaders will go along with any approach that differs greatly from their own bill they passed in May, which he opposed. Braley has introduced bills for the past two years to keep loan rates at 3.4 percent for two additional years.