Senate leaders traded barbs Wednesday after a potential bipartisan deal to avert a student loan interest rate spike was shot down by Majority Leader Harry Reid (D-NV), who said it wouldn't pass. Rates are set to double for millions of students on Monday from 3.4 to 6.8 percent if no action is taken.
"There is no deal on student loans that can pass the Senate because Republicans continue to insist that we reduce the deficit on the backs of students and middle-class families, instead of closing tax loopholes for the wealthiest Americans and big corporations," Reid's spokesman Adam Jentleson said. "Democrats continue to work in good faith to reach a compromise but Republicans refuse to give on this critical point."
Senate Minority Leader Mitch McConnell's (R-KY) spokesman fired back.
"Sadly, the Democrat leadership continues to block bipartisan student loan reform by attacking the President’s plan. As a result of their obstruction, interest rates on some new student loans will increase next week," said Don Stewart. "Why Senate Democrats continue to attack the President’s plan is a mystery to me, but I hope he’s able to persuade them to join our bipartisan effort to assist students."
Meanwhile, discussions are continuing behind the scenes, just five days before the spike.
The final outcome is hewing toward linking federally-subsidized Stafford loan interest rates to the 10-year Treasury note, with some adjustment. Republican leaders insist on the idea, which was proposed by President Obama. Democrats don't like the idea but they privately concede that they might be willing to accept it.
But Democratic leaders have two non-negotiable asks: One is that interest rates be capped so protect student borrowers in the event of a market fluctuation. The second is that any money saved be funnelled back into programs that help students, such as Pell Grants.
For now, Senate Democrats are eying a short-term solution if no deal is reached. One possibility is a one-year freeze for the existing 3.4 percent rate.