Interest rates on federally subsidized student loans are set to double from 3.4 percent to 6.8 percent on July 1. Both parties support a legislative fix but differ on how to do it.
Republicans have offered legislation, modeled on President Obama's own proposal, to tie student loans rates to the yield on the 10-year Treasury bill. (Obama's plan has more safeguards to provide certainty and cushion the blow for low-income students.) But Senate Democrats went in a different direction, bringing up a bill to freeze the 3.4 percent interest rate for two more years and paying for it by closing unpopular tax loopholes for oil and gas, offshore tax havens and tax-deferred retirement accounts.
Predictably, Republicans blocked it from getting the 60 votes needed to move forward. It received 51 votes -- all from Democrats.
"It's a bill Democrats know will fail. In fact, they actually seem to be indicating they want it to fail," Senate Minority Leader Mitch McConnell (R-KY) said Thursday before the cloture vote. "Why? Undoubtedly so they can keep this issue alive for their permanent campaign."
Democrats are indeed picking a fight, conscious that they have a built-in political advantage on the issue, and hoping to expand their margins with the youth vote. A recent report by the College Republicans found that the party is losing its relevance with Americans aged 18-29, and said Millennial voters view student loans as an important pocketbook issue.
"We have no reason to work out a compromise," Senate Majority Leader Harry Reid (D-NV) told reporters Tuesday, when asked about the debate on student loans. "I'm not looking for compromise. I'm looking to pass our bill."
The GOP, meanwhile, is eager to take the issue off the table, but not at the expense of relenting on their anti-tax absolutism. House Republicans passed their bill last week and Senate Republicans offered similar legislation. But, notably, GOP senators highlighted that unlike the House bill, their version does more to protect students by fixing the interest rate for the life of the loan when it's taken out -- which also reflects Obama's proposal.
"The House would have it going up each year," said Sen. Lamar Alexander (R-TN). "I don't like that idea and I don't think many students would."
The White House has come out for the Democrats' plan, even though Obama's plan is more conceptually similar to the GOP proposals. Some education policy experts argue the the Obama and Republican plans aren't very far apart -- although Reid dismissed that argument Thursday as a "Republican talking point." The GOP proposal, he said, "is not even close to what we want."
It's not clear what the next step is, but lawmakers have less than a month to find a solution to stop student loan rates from doubling. Sen. Chuck Schumer (D-NY) this week said Democrats "welcome and relish" a debate on the matter, according to Roll Call, saying it's important to young people and it "shows the difference between the two parties on a key issue."