Senate negotiators are nearing a deal on federal student loan rates — and, if agreed to, it would be very similar to a proposal from the White House that was embraced by Republicans but not by congressional Democrats.
As CQ Roll Call reported previously, Democrats were hamstrung by the White House offer, which put them in the awkward position of objecting to proceeding on the president’s own plan.
Senate Democrats had wanted a two-year extension of current law, which expires July 1 and sets subsidized Stafford loan rates at 3.4 percent. Aides privately grumbled Friday that they were forced into a deal that was worse than they could have gotten without the White House framework. The White House’s proposal, included in its fiscal 2014 budget blueprint, forced the negotiations to the right, Democrats argue. Republicans, meanwhile, see themselves on the brink of a deal they favor.
The current compromise, which aides say is still dependent on a score from the nonpartisan Congressional Budget Office, would set subsidized and unsubsidized Stafford loan rates at the 10-year Treasury note plus 2 points. If a student were to take out a loan under this plan tomorrow, his or her loan rate would be 4.41 percent. It also would impose a cap on rates so that in better economic times, when Treasury note rates go up, they would not unduly burden students.
The White House already had issued a veto threat of a House GOP plan on the grounds that House Republicans would not have locked down rates for the life of student loans. The White House also argued that the GOP framework would reduce the deficit by using extra revenue from students. This second complaint — that deficit reduction could come from American students’ payments — still likely will hold true if Senate negotiators agree to their plan, according to staffers familiar with the agreement. But because it so closely resembles what administration officials proposed, it’s unlikely they could block it.
Our CQ Roll Call colleague Lauren Smith has more details from progress made Thursday, when White House Chief of Staff Denis McDonough met with Senate Democrats, especially those who are not thrilled with the emerging deal.
“As you know, I would prefer staying with the 91-day T bill rate, but if the consensus is we have to go to 10 years, then there’s other ways we can help save money on the interest rates,” said Sen. Tom Harkin, D-Iowa. “There may be some trade-offs there that will still be better than letting the rates double.” …
Majority Whip Richard J. Durbin, D-Ill., said several details still need finalizing, including specifying a percentage above the 10-year Treasury bill that would be added to the rates and a more philosophical question about revenue generated from the student loan program.
“Is it going to be a profit-maker for the federal government?” Durbin asked. “We should not be generating a surplus for the Treasury at the expense of working families and students.” …
Both sides of the aisle acknowledged momentum toward an agreement Thursday. Republican Sens. Tom Coburn of Oklahoma and Richard M. Burr of North Carolina, two key negotiators, said they expect a deal to be finalized within 24 hours.