House GOP, Senate Dems trade barbs over student loan rates

The student loan blame game picked up Monday right where it left off, with both parties trading barbs over who is to blame for the recent doubling of interest rates for roughly 7 million new students.

The interest rates on subsidized Stafford student loans, made available to low-income borrowers, doubled on July 1 to 6.8 percent and could mean students who need financial assistance will have to pay thousands of dollars more in interest.

{mosads}But neither the missed deadline nor the weeklong July 4 recess did much to push debate along a more productive path.

House Republicans returned from the break and immediately resumed pressuring Senate Democrats to move their preferred approach to lowering student loan interest rates.

“The White House and Senate Democrats have let these students down,” said Speaker John Boehner (R-Ohio). “The House has done its job.”

Meanwhile, Senate Majority Leader Harry Reid (D-Nev.), who was singled out by House Republicans as the main culprit of the rate hike, pointed a finger at the GOP proposal, calling it worse than simply letting the rates double.

“What they’ve done over there is worse for students than doing nothing at all,” he said on the Senate floor in the first remarks after the break, adding the GOP plan would “balance the budget on the backs of struggling students.”

Pointing out that the GOP bill would not set a cap on how high interest rates could rise, Reid argued the Republican plan could lead to interest rates far higher than where they currently stand.

He announced plans to vote, likely Wednesday, on a bill from Sen. Jack Reed (D-R.I.), which would return rates to the 3.4 percent level for one more year.

Reid called on Boehner to work to win over Democrats with a similar plan. That bill failed in June to garner the necessary 60 votes.

“The Speaker should work with us and his Democratic colleagues in the House, instead of against them,” he said.

House Democrats got into the mix as well. Minority Leader Nancy Pelosi (Calif.) said in a statement that her fellow Democrats are ready to negotiate and accused Republicans of refusing to compromise.

“They simply pushed their plan to make college more expensive and saddle Americans with more debt — then left town just days before interest rates doubled,” she said.

The Congressional Budget Office estimated that about $28 billion of subsidized student loans would be issued in 2013, good for roughly a quarter of all student loan debt issued.

Poorer borrowers are particularly pinched by the Capitol standoff because the subsidized program is aimed at students who need help paying for college.

A Joint Economic Committee study commissioned by Sen. Amy Klobuchar (D-Minn.) determined that the average borrower will have to pay an extra $2,600 over the life of the loans under the higher rates.

Republicans see the issue as a political winner.

Senate Democrats have so far not rallied around a bipartisan Senate bill that is similar to legislation that has been approved by the House.

And, as Republicans are quick to point out, the White House has offered an idea for student loans similar to the one put forward by House Republicans and in the Senate compromise.

The latest White House budget proposal would tie the interest rate for the loans to the interest rate for 10-year Treasury bonds, allowing it to rise and fall alongside it.

Meanwhile, Senate Democrats are still pushing a one-year freeze of the lower rates, to buy more time to craft a long-term solution.

“Since the President, Republicans and some Democrats agree on the need for reform and how to reform the system, maybe the Dem leadership will come around and stop attacking the President’s plan,” said Don Stewart, spokesman for Senate Minority Leader Mitch McConnell (R-Ky.). “We’ll see.”

The White House has threatened to veto the House bill despite those similarities.

The administration argues that the House legislation lacks key repayment assistance programs and allows the interest rate to be reset each year, as opposed to locking in when the loans are originated as it would be under the administration plan.

The White House proposal would not raise rates as much as the House GOP plan but does not include the cap on interest rates that Reid mentioned Monday.

The Obama administration has largely taken a back seat in the fight, one year after President Obama made the last expiration date for lower rates a central point of his reelection campaign.

White House spokesman Jay Carney said Monday he hoped Congress would “quickly” lower the rates retroactively, adding that the “differences are not that different” between competing bills.

Meanwhile, a bipartisan group of senators who announced they had struck a compromise in the final days of June are effectively sidelined while leadership haggles.

The lawmakers, helmed by Sens. Joe Manchin (D-W.Va.) and Richard Burr (R-N.C.), announced they had reached a breakthrough, but Reid refused to sign off on the deal.

He argued that because the measure includes roughly $1 billion in deficit reduction, the rates should be similarly lowered to provide maximum relief to students.

That compromise plan would tie student loan interest rates to Treasury bond rates, but at a lower rate than the House plan. It would also lock in the rate when the loans are created, instead of allowing them to change every year.

Reed’s bill would cover the costs of the lower rates by scrapping a handful of tax breaks, including one for tax-deferred retirement accounts used in estate planning.