Student loan interest rates doubled July 1 as Congress left for the weeklong holiday recess without passing legislation that would prevent the automatic rate hike. But despite promises to rectify the situation upon their return last week, yet again partisan gridlock derailed attempts to address the issue, with interest rates remaining at 6.8 percent.
That doesn’t mean a rate fix won’t happen, though. Here’s what has been on the table and what has already been given the ax.
House Republicans passed a bill in late May that tied student loan interest rates to market-based rates, but critics of the bill warned that this legislation would immediately raise rates higher than the 3.4 percent they have been, and in the future potentially even higher than the current 6.8 percent doubled rate.
Senate Democrats introduced a bill prior to the holiday to extend the 3.4 percent interest rate for another year as a permanent solution is sought, but just as a similar bill was filibustered in June, this legislation could not survive a Republican filibuster this month. Attempts to end the filibuster failed to reach the 60 votes necessary, with all Republicans (and one Independent and one Democrat favoring alternative legislation) voting against proceeding on the bill. Senate Majority Leader Harry Reid (D-Nev.) also voted against ending the filibuster as a procedural move in order to allow him to reintroduce the bill at a later date.
Alternatives include a bipartisan Senate bill that, similar to the House, sets interest rates at market-based rates, but with a smaller additional percentage. This bill has yet to be introduced on the Senate floor, much like Sen. Elizabeth Warren’s (D-Mass.) popular proposal. Warren’s bill, introduced in May, sets interest rates at market rates with no additional percentage, allowing students to borrow from the government at the same rate that banks do. This would bring current student loan interest rates to .75 percent, and has been endorsed by more than a thousand college professors from nearly 600 educational institutions.
Despite last week’s filibuster and the partisan blame game, there are still options for Congress to act upon quickly. If you’re taking out or renewing subsidized Stafford loans, it may be prudent to wait and see how Congress acts.