The clock is ticking for Congress to reach an agreement to keep federal student loan interest rates at 3.4 percent before Monday’s deadline,when those rates are set to double.
Federal Stafford loans are low-interest financial assistance granted to eligible needs-based students each semester that allow recipients to defer making payments until six months after they have finished school.
The new proposal,the Keep Student Loans Affordable Act of 2013 – which Sen. Tom Harkin,D-Iowa,chairman of the Senate Health,Education,Labor and Pension Committee,said is fully paid for – would rely on closing a tax loophole on certain retirement plans,IRAs and 401(k)s,which allow people who inherit them to avoid paying taxes on the money for several years.
Harkin spoke about the plan Thursday at a press conference with Sens. Al Franken,D-Minn.; Kay Hagan,D-N.C.; Jack Reed,D-R.I.; Debbie Stabenow,D-Mich.,and Elizabeth Warren,D-Mass.
So far,however,Senate Democrats and Republicans have had little success in coming to an agreement on what to do about interest rates. There has even been division within the Democratic party.
Thirty-four Democrats have signed onto the proposal,written by Reed and Hagan.
But Sen. Joe Manchin,D-W.V.,who serves on the committee with Harkin and the others,has joined with Republican senators on the committee with a plan of his own.
That proposal,the Bipartisan Student Loan Certainty Act,would set loan rates based on a formula linked to 10-year Treasury bills. He said it would reduce the deficit by $1 billion over 10 years.
Franken,who supports Reed and Hagan’s proposal,said students in his state have been forced to resort to extraordinary measures to pay for increasing tuition costs.
Many he spoke to are working more than 30 hours a week to support themselves,he said. Others have been forced to take more drastic measures.
“I’ve had kids – and this shocked me – they sell their blood,” Franken said. “They sell their blood to go to school. And yet they have this debt when they leave.”
Warren said keeping interest rates low is a moral issue.
“The fundamental issue is whether or not the United States government should be making a profit off our students,” Warren said. “Making billions in dollars off our students.”
Harkin said that,so far,Congress has been too slow to even take up the issue.
“Let me just point out that Congress has had no hearings on any of these proposals,” Harkin said. “No hearings.”
Much focus has been given to the Senate’s vote on immigration reform,Stabenow said. [The Senate approved the immigration bill shortly after the news confernce on a 68-32 vote.]
“I would point out that some of those who’ve not wanted to spend $4.6 billion on a future for students were willing to spend $40 billion on a fence,” she said. “A 700-mile fence. Well,we’d like to make sure we have people educated enough to help design that fence.”
Although rates are set to increase Monday,Reed said the senators hope to pass their plan retroactively on July 10. Most students who need loans will be applying later in the summer.
He said he hopes Republicans won’t filibuster their proposal.
“This is going to require,as it does so many times here,60 votes,” Reed said of the number of votes required to stop a filibuster.
Reach reporter Memet Walker at [email protected] or 202-326-9867. SHFWire stories are free to any news organization that gives the reporter a byline and credits the SHFWire.