Many Democrats believe a cap on interest rates is necessary to protect students. No student loan fix before recess

Federal student loan rates are set to double next week after the Senate failed to coalesce behind a solution to the vexing problem.

Sen. Tom Harkin (D-Iowa), the chairman of the Health, Education, Labor, and Pensions Committee, said in an interview Thursday afternoon that the best solution now is to advance a one-year extension of the current rate of 3.4 percent — which will jump to 6.8 percent on July 1.


But that solution will come retroactively. The Senate passed its immigration bill at 4 p.m. but there are no plans to put on the floor any student loan bill after Democratic and Republican votes failed earlier this month.

Harkin said a one-year extension is “the one way we can do something where nobody blames somebody else,” which might be news to House Republicans who have already passed a federal loan bill. That legislation drew a veto threat from President Barack Obama, but the House has been needling the Senate in recent days over its failure to act.

A proposal from Sens. Angus King (I-Maine), Richard Burr (R-N.C.), Lamar Alexander (R-Tenn.), Tom Coburn (R-Okla.) and Joe Manchin (D-W.Va.) has fallen flat in the Senate Democratic Caucus, though Senate Republican leadership supports it.

Don Stewart, a spokesman for Senate Minority Leader Mitch McConnell (R-Ky.), called the impasse “baffling.”

“Senate Democrats are rejecting the president’s reforms and we can only hope that he’ll try and change their minds,” Stewart said.

Congress has a slim window for action following the July 4 recess, as the majority of student loans are made before the end of the summer. Democratic Sens. Kay Hagan (D-N.C.) and Jack Reed (D-R.I.) pitched a plan Thursday to extend the current rates by one year, giving the HELP committee time to revisit the issue later this year as part of a broader review of the Higher Education Act, which is due for reauthorization. The bill would pay for the reduced rates by closing a tax loophole on inherited individual retirement accounts and 401(k)s.

“We’re too late to do anything. We’re still at loggerheads, and the best thing is to get a one-year extension and put this in the Higher Education Act where it belongs,” Harkin said.

“We need to approach this in a deliberative matter. We have not heard from any outside experts,” said Harkin during a Thursday press conference. “Just in the last couple of weeks I’ve seen probably half a dozen different proposals floating around, but none of them have been vetted and no hearings have been held.”

A vote on the Hagan-Reed bill could happen as early as July 10, but its success would depend on wrangling a 60-vote majority.

Manchin was seen talking animatedly with Harkin on the floor of the Senate during procedural votes on the immigration bill.

“If you only want to extend it for one more year — we failed to fix it the first year, we’re notorious for not fixing anything, we’re notorious for kicking the can down the road. We’ve said enough is enough,” Manchin said alongside the other negotiators on Thursday morning. “It’s about policy, it’s about what’s good for the country, not what’s good for either party, and not whether you can game somebody to make them look bad to elevate yourself.”

Thursday afternoon, Reed tried to call up his measure while McConnell tried to call up the negotiators’ bill. Both attempts were blocked.

At the root of the problem is a disagreement about a cap on interest rates, which many Democrats, including Harkin and Majority Leader Harry Reid Reid (D-Nev.), believe is necessary to protect students. The House bill caps loan rates at 8.5 percent while the Manchin-led plan caps consolidated loans at 8.25 percent. Senate Democrats argue both could result in scenarios where rates are higher than 6.8 percent.