WASHINGTON — The Senate is poised to vote on a bipartisan student loan bill after lawmakers reached a compromise to lower interest rates from their automatic hike on July 1.
The weeks-long negotiations made headway late Wednesday after Republicans and Democrats met with President Obama on a bipartisan proposal drafted by West Virginia Democrat Joe Manchin, Maine independent Angus King, Tennessee Republican Lamar Alexander, North Carolina Republican Richard Burr and Oklahoma Republican Tom Coburn.
The senators’ bill would tie student loan interest rates to market rates — a Republican proposal that originated with the president and passed in the House — with the addition of rate caps on subsidized, unsubsidized and consolidated loans —- the Democratic addition.
“The legislation as presented to me isn’t everything I want, but it’s the work of a number of Democratic and Republican senators working long, long hours,” Nevada Democrat and Senate Majority Leader Harry Reid said Thursday.
After failing to bring the deal to a vote Thursday, Reid is expected to bring up the bill Friday.
Student loan interest rates automatically doubled from 3.4 percent to 6.8 percent after a temporary fix from Congress expired on July 1. Under the new plan, loans would be set to the fluctuating U.S. Treasury 10-year borrowing rate.
On top of the Treasury note, undergraduates will pay 2.05 percent and be capped at 8.25 percent, graduates pay 3.6 percent with a 9.5 percent cap, and PLUS loan borrowers will add 4.6 percent and cap at 10.5 percent.
That means that for the coming fall semester, undergraduates would borrow at 3.85 percent interest, graduates at 5.4 percent and parents at 6.4 percent.
The bill is estimated to shave $715 million off the deficit over 10 years. It would also take the burden of funding student loans off of taxpayers, according to Republicans, and prevent the government from making a profit on students, according to Democrats.
Eleven million students are expected to take out 18 million federal student loans for the coming fall semester, which would cost a projected $100 billion under the current system.
Speaker of the House John Boehner expressed optimism Thursday at the prospect of the bill in light of its similarity the already-passed House version. Sen. Lamar Alexander, a former education secretary, said that if the House is on board, the president could have a bill to sign by the end of July.