Roll Call: Latest News on Capitol Hill, Congress, Politics and Elections
September 2, 2014

Democrats Looking to Compromise on Student Loans

Senate Democrats will meet Thursday with Education Secretary Arne Duncan and top Obama economic adviser Gene Sperling at their weekly policy luncheon to discuss a potential compromise on student loans.

Senate Majority Leader Harry Reid, D-Nev., announced the meeting with administration officials on Tuesday, just one day after senators involved in forging the potential deal met in his Capitol suite with Democratic leaders. Among the lawmakers involved in the Senate Democrats’ efforts on the issue are freshman Elizabeth Warren of Massachusetts, Joe Manchin III of West Virginia and Democratic-leaning independent Angus King of Maine. If Congress fails to strike a deal by July 1, subsidized Stafford student loan rates are set to double from 3.4 percent to 6.8 percent.

As we’ve previously reported, Congressional Democrats are in a bit of a pickle on the student loan issue, as their position diverged from that of the White House. But facing pressure from rank-and-file members, Senate Democratic leaders have decided that forging a compromise is a better option than trying to score a political win by letting the rates lapse, especially given the similarities between the Obama plan and one introduced by Senate Republicans.

“All of them are working really hard to try to get something that’s good for young men and women,” Reid said of the negotiating group. “We’re not there yet.”

According to multiple sources, the most significant sticking point for Senate Democrats is the inclusion of caps on future student loan rates. As the White House and Senate GOP plans are pegged to Treasury note prices, Democrats are concerned that in a good economy, rates would increase above levels students would be able to pay. The key selling point at this juncture for Democrats is their complaint that without caps, the government would be using the increased funds from students to pay down the deficit.

Our colleague Lauren Smith at CQ has been reporting extensively on this issue as well, and has some nice details about Duncan’s position on the talks and where compromise could be found.

Duncan, who was in the Senate Tuesday testifying before the Budget Committee, said he’s “hopeful” that Congress can come to an agreement.

“Everyone is trying to find middle ground,” Duncan said. “We have some work to do, but doing nothing would be untenable. No guarantees in any of this, but I’m hopeful. I know people are sincerely committed to doing the right thing here.”

The statements from both sides of the aisle that negotiations have been productive marks the first serious attempt in the Senate to stave off the interest rate hike that would cost more than 7 million students approximately $1,000 apiece more in loan repayments per year.

Senate Democrats have backed a bill that would peg interest rates to the 91-day Treasury note rate plus a percent decided by the Education secretary. It would cap interest rates for the subsidized portion of the loan at 6.8 percent and the unsubsidized portion and graduate loan at 8.25 percent. It also includes the White House proposal to expand the income-contingent loan repayment plan.

A source tracking the Senate Democratic talks tells #WGDB that leadership has just recently requested a score from the non-partisan Congressional Budget Office and an agreement could be announced in the coming days.

  • Susen Shapiro

    Once again, Obama proves himself to be a friend of the GOP and not the people. Kool Aid drinkers, when will you have had enough?

  • MariaM

    Let them compromise – neither of their proposals will really help anyone anyway. Those of us with older loans are already paying more than double the interest rates being discussed here.

    Imagine paying on your student loan for 11 years straight … never late, never missing a single month. Then notice that not only are you making zero progress on paying it off, but your balance has doubled because the interest just piles on and on and on! It’s time to stop these predatory, government-sponsored loan sharks in their tracks! Sign the petitions!

    http://petitions.moveon.org/sign/allow-people-to-discharge?source=c.url&r_by=7737772

    http://www.change.org/petitions/us-government-give-americans-the-ability-to-discharge-student-loans-in-ch-7-bankruptcy#share

    Some of us really need this, and the above article is just another case in point. I hope you’ll sign and spread the word. Thanks.

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