WASHINGTON — The top senators of each party engaged each other over student loan rates Tuesday, denouncing each side’s solution and still leaving students without a solution past the July 1 deadline.
“We should be making the burden lighter for students and their families, not seeking profits, and I’m sorry to say that’s what happens now,” Senate Majority Leader Harry Reid said Tuesday. “The two Republican proposals, one from the House, one from the Senate, are worse than nothing — that’s what the students say.”
“If you can explain to me why doing something is better than doing nothing, then we’ll do it,” Reid said.
The Republican proposals by the House and the Senate would permanently reset interest rates for student loans every year at the U.S. Treasury 10-year borrowing rate.
If adopted this year, for example, undergraduate student loans, which account for two-thirds of all education loans, would have a 3.6 percent interest rate — a modest rise from the 3.4 percent rate that expired at the end of June.
However, if Treasury rates go up from their current all-time record-lows — and it is almost guaranteed they will — student loan interest rates go up too, with no cap on the potential rate increase. Consolidated loans would remain capped at 8.25 percent.
“The Democrats are supporting a plan that would continue student loans as a profit center for the government,” Tennessee Republican Sen. Lamar Alexander said on behalf of Minority Leader McConnell.
“Seven million undergraduate college students from middle income families will be twisting in the wind, paying twice as much in interest rates than they need to pay,” Alexander, a former secretary of education, said.
Democrats support a short-term fix — freezing the subsidized student loan rate at 3.4 percent for one year, benefiting the 2 million lowest income borrowers eligible. Unsubsidized loans, those most available to the 7 million middle-income borrowers, would be left at the increased rate.
The Reid plan would be paid for by revenue from removing a tax loophole in accounting retirement plans for the wealthiest percent of taxpayers.
Roughly 11 million students will take out 18 million federally funded student loans before the fall semester, at a cost of about $100 billion under the current system.
Reid indicated Tuesday he would be meeting with White House Chief of Staff Denis McDonough and Secretary of Education Arne Duncan. The majority leader will bring the frozen rate plan to the Senate floor for a procedural vote Wednesday.