For millions of college students, the Senate’s failure to pass legislation that would avoid the doubling of interest on new subsidized student loans must feel like a betrayal. The Senate defeated two bills — one Democrat-sponsored, one Republican-sponsored — that would have brought relief to 7.4 million borrowers.

In June 2012, Congress froze the lending rate for federally subsidized student loans — which offer the most generous interest rates and make up a significant share of the federal government’s need-based student aid program — at 3.4 percent.

Now that low interest rate is set to expire, forcing students to pay more to finance their education. On July 1, the rate charged on these loans will skyrocket to 6.8 percent without congressional intervention.

For students that take the federal maximum of subsidized loans, the automatic increase could result in an increase in costs of more than $1,000 over the lifetime of the loan.

“This is the opening act of the circus,” Sen. Lamar Alexander (R-Tenn.) said, according to the Washington Post. “Won’t take too long. Will be a little embarrassing that we have to go through it… If we can’t agree on this, we can’t agree on anything. This is a manufactured crisis.”

Competing bills

The Republican proposal, introduced by Sen. Tom Coburn (R-Okla.), would peg the interest rate for federal subsidized student loans at the bond equivalent rate of 10-year Treasury bills plus 3 percent. This rate would be locked in for the life of the loan. At the time this article was written, the 10-year Treasury note rate was 2.14 at percent, meaning that under the Republicans’ plan, students would pay 5.14 percent on new loans.

This, according to the Congressional Budget Office, is problematic. Interest rates for the 10-year Treasury bill are expected to rise, hitting a baseline projection of 5.2 percent by 2018. At this level, the interest on student loans would be 8.2 percent — higher than if Congress did nothing at all.

President Barack Obama has offered a plan with a similar structure but interest rates that would be more than 2 percentage points lower. Under his proposal, borrowers would face a 6.1 percent rate in 2018, a 0.7 percent reduction compared to the July 1 automatic increase.

Despite the plans similarities, the White House promised to the veto the Republican bill. Senators voted 57-40 against an effort to bring up the bill for formal debate.

Sen. Tom Harkin (D-Iowa), chairman of the Committee on Health, Education, Labor and Pensions, said the Republican bill is needlessly harsh and worse than leaving the current situation alone.

“This is the worst possible approach,” Harkin said. “You shouldn’t reduce the deficit on the backs of students.”

The Democratic proposal, introduced by Sen. Jack Reed (D-R.I.), took a different approach. In contrast to the Republican proposal, it would have frozen the rate at current 3.4 percent until June 30, 2015, allowing Congress more time to develop a permanent solution. The bill also included a number of tax provisions designed in part to pay for the added cost of extending the lower interest rate.

Republicans solidly blocked the passage of Democrats’ proposal on a 51-46 vote, short of the 60 votes needed to move forward with the bill.

“If you believe that it’s appropriate for Congress to pick winners and losers then support this bill,” Sen. Richard Burr (R-N.C.), said of the Democrats’ plan. “If you believe that that’s not the congressional role and that we need a long-term, permanent, transparent, predictable solution, then vote against this bill and let’s sit down between now and July 1 and write a bipartisan approach that solves this problems once and for all.”

The rush for a solution

Congress has busied itself in recent days addressing the issue of college loan repayment. Besides the two failed Senate bills on the topic and the passed House bill, there are currently more than 10 bills pending in committee in both houses to address the issue.

On May 23, the House approved a proposal introduced by Rep. John Kline (R-Minn.) that set the annual interest rates at the 10-year Treasury note rate plus 2.5 percentage points. In contrast to Senate Republicans’ bill, however, Rep. Kline’s bill caps the rate at 8.5 percent.

The bill also set the annual interest rate on Direct PLUS loans at the 10-year Treasury note rate plus 4.5 percentage points, with a cap at 10.5 percent, and it resets the rates for all federal direct loans every year.

Others bills include Rep. John Tierney’s (D-Mass.) “Responsible Student Loan Solutions Act” H.R. 1946), which set new aggregate limits for direct loans and pegs the interest rate to the 91-day Treasury note rate; Rep. Joe Courtney’s (D-Conn.) “Student Loan Relief Act of 2013” (H.R. 1595), which extends rates established under the Higher Education Act of 1965 to 2015; and Sen. Elizabeth Warren’s (D-Mass.) “Bank on Students Loan Fairness Act” (S.897), which pegs federal direct loan rates to the Federal Reserve’s discount window rate.

Other bills proposed look at the long-term repayment of these loans. One such bill –Rep. Karen Bass’s (D-Calif.) “Student Loan Fairness Act” (H.R. 1330) — addresses the issue of loan forgiveness. Bass’s bill caps the repayment rate of student loans to 10 percent of the payee’s income, and forgives the loan after 120 consecutive payments.

Despite this furor of activity toward addressing the problem with student debt, it reminds many that similar debates were seen the year before and the year before that, with little to show as a result. With the Congressional Democrats seeking a continuation of low fixed rates, Republicans seeking a market-based approach to determining loan rates, and the White House promoting a plan combining the two approaches, many feel that a compromise that would offer relief to the nation’s students is still only a dream.

“Why do we have to debate this every year?” asked Sen. Chuck Schumer (D-N.Y.).