On Thursday, legislators ran into another hurdle in their attempts to lower the interest rates on student loans when a working agreement revealed it was cost $22 billion over the next 10 years.
After lawmakers failed to come to a consensus by the July 1, 2012 deadline, student loan rates increased, some doubled.
Legislators are returning to the bargaining table to attempt to find a happy medium between Democrat and Republican leaders.
According to a report on Fox News, The proposal in the works was designed to offer Democrats the promise that interest rates would not reach 10 percent and to give Republicans a link between borrowing terms and the financial markets that they sought. But at that cost, the bipartisan coalition behind it decided to push pause and return to negotiations to bring that cost down
A senate aide confirmed these numbers with Fox News, according to the report.
“So it’s back to the negotiating table. A compromise is necessary and remains the goal. The CBO score demonstrates to both sides how costly a cap can be to taxpayers,” the aide said.
The results of the dithering on both sides caused the rates on subsidized Stafford loans to increase from 3.4 percent to 6.8.
While this may have many students anxious about starting school in the fall, the legislatures have not abandoned the issue which many students and parents are facing.
Under the proposed plan, that fail apart, the interest rates on new loans would be based on the 10-year Treasury note, plus an additional percentage to pay for administrative costs. The proposal included a maximum on how high rates could climb, a demand Democrats said was a deal-breaker.
While the proposed deal would have given temporary relief from the increased rate of 6.8 percent, if the economy improved and the Treasury notes were to rise so would the rates on the student loans. The interest rates in the fall, for undergraduates, would have been approximately 4 percent and had a cap of 8.25 percent.
Graduate students and parents would have seen a similar affect, lowers rates next year, but the potential for them to increase beyond the present 7.9 percent in years to come. The fall rate would have been about 6 percent with a cap of 9.25 percent.
Serious work on a compromise came just hours after Democratic-led efforts to restore the 3.4 percent interest rates failed once more to overcome a procedural hurdle in the Senate. After several failures to find a stopgap measure, Democrats abandoned that tactic and instead looked for a way to lower rates for students before their return to campus this fall, stated the Fox News report.
On Tuesday evening, Obama’s chief of staff, Denis McDonough, and Education Secretary Arne Duncan met with lawmakers to discuss other possibilities, including President Obama’s market based approach, but Democrats refused because they wanted to make one last attempt in restoring the 3.4 percent rate.
When that approach failed again, Legislators met on Wednesday, along with White House education and budget advisers and created the proposal that they are presently laboring over to come to a consensus.
Democratic Sen. Tom Harkin of Iowa, chairman of the Senate Health, Education, Labor and Pensions Committee, also took part in the discussions and reconsidered a deal he previously said was unacceptable. He was able to get compromises from the authors of an earlier approach to the issue: Sens. Joe Manchin, D-W.Va., Richard Burr, R-N.C., and Angus King. I-Maine.
According to reports, they were attempting to make adjustments to the some of the items to make it more acceptable to Harkin and his Democratic allies.
Fox News further reported, that Tennessee Sen. Lamar Alexander, the top Republican on the Senate committee, joined in and suggested he could bring with him Republican votes that would help overcome a 60-vote procedural hurdle in the chamber.
Consequently, $22 billion over the next 10 years, is unlikely to win the Republican vote.
If legislatures are unable to come to a compromise, students returning in the fall will see interest rates on student loans doubled since school let out. The present rate may increase the cost of borrowing by an additional $2,600 for students returning this fall, according to Congress’ Joint Economic Committee.
By: Veverly Edwards