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Will Student Loan Compromise Pit Dem Vs. Dem?

Manchin agreement not so celebrated this time as many lawmakers play the blame game over interest-rate hikes.

by
Rodrigo Sermeño

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July 9, 2013 - 4:25 pm
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WASHINGTON – Sen. Joe Manchin (D-W.Va.) once again tried to play middle-man for a contentious bill in the upper chamber, today touting the student-loan compromise that he and Sens. Tom Carper (D-Del.) and Angus King (I-Maine) forged with members of the Republican caucus.

But Manchin, King and Carper, essentially competing with Democratic leaders in a press conference today, are finding a lukewarm to hostile environment for the compromise within their own caucus.

“We have shown a willingness to compromise, but it’s time for Republicans to do the same. A compromise isn’t something that you just take whatever the other side offers you,” Senate Majority Leader Harry Reid (D-Nev.) said of “a number of my senators who are working with Republicans, trying to come up with something.”

Sens. Elizabeth Warren (D-Mass.) and Tom Harkin (D-Iowa) have reportedly been ripping Manchin over the deal as well.

Interest rates for subsidized federal student loans doubled July 1, following months of deadlock in Congress over finding a solution among the myriad competing proposals that have emerged from both parties.

The rise in the interest rate came because Congress failed to reach an agreement at the end of June for the student-loan program. The White House, House Republicans, and Senate Democrats have all pushed proposals to keep the rate from doubling. Senate Democrats want a cap in place to protect students if interest rates climb. President Obama and congressional Republicans have introduced slightly different proposals that tie loan rates to the 10-year Treasury yield.

The change in interest rates applies only to new subsidized loans issued after July 1 and would not affect students currently borrowing at the former rate of 3.4 percent.

In 2007, Congress passed the College Cost Reduction and Access Act to temporarily lower rates. The law dropped the interest rate for the need-based loans from 6.8 percent to 3.4 percent in a four-year period, ending in 2011. It eliminated the variable rates of Stafford loans, and instead, set unsubsidized loans at 6.8 percent, and subsidized loans at a lower, variable rate. Congress approved a one-year extension in 2012, which expired at the end of June.

Now that the extension has expired, both sides are denouncing each other for failing to reach a compromise in the latest episode of Washington discord.

“The divisions among the president and his own party,” House Speaker John Boehner declared last Monday, “are directly responsible for the current impasse that will now result in higher borrowing costs for students already coping with skyrocketing tuition bills.”

The House passed a bill sponsored by Republicans in May that would tie subsidized Stafford loan interest rates to the 10-year U.S. Treasury note, plus 2.5 percentage points, with a cap at 8.5 percent. Democratic senators proposed a plan stopping need-based student loan increases for two years to give Congress time to overhaul the federal student loan program. Obama’s plan falls somewhere between the House and Senate bills. The White House would set student lending rates each year based on Treasury’s borrowing costs, but those rates would be fixed for the life of the loan.

The compromise bill from Manchin, Carper, King, Lamar Alexander (R-Tenn.), Tom Coburn (R-Okla.) and Richard Burr (R-N.C.) ties all newly issued student loans to the U.S. Treasury 10-year borrowing rate plus 1.85 percent for subsidized and unsubsidized undergraduate Stafford loans; plus 3.4 percent for graduate Stafford loans; and plus 4.4 percent for PLUS loans with an 8.25 percent cap for consolidated loans.

Lawmakers called for action upon Congress’ return to Washington this week.

“I call on Congress to return immediately to Washington and pass legislation that will retroactively prevent this de facto tax increase on young people already struggling under mountains of debt. There is still time to undo this rate increase before borrowers feel its pinch. It is imperative that we act quickly, and show young people across this country that we are committed to easing the student loan debt crisis,” Sen. Richard Blumenthal (D-Conn.) said.

He encouraged students to make their voices heard through Twitter by using the #DontDoubleMyRate hashtag. Last year, students made the hashtag, which was created by the White House to put pressure on Congress, trend on Twitter nationally.

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40 weeks ago
40 weeks ago Link To Comment
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40 weeks ago
40 weeks ago Link To Comment
What do you mean let all those government serfs off the hook to us? Why would we? We can then make them pay us twice for most of their natural lives - taxes and loan payments.

I am so thankful that my loans are through a private institution. They are so much more flexible with payment solutions and so much more easy to work with as compared to my husband who is stuck with Leviathan for his loan shark.
40 weeks ago
40 weeks ago Link To Comment
How about this: the federal government should get out of the student loan business, period. No loans = no need to worry about the rate. Students/parents who want to borrow to finance their educations could go to those institutions that have evolved to lend money: banks. Side benefit: getting rid of easily available subsidized loans would force many colleges to cut tuition dramatically.
40 weeks ago
40 weeks ago Link To Comment
The student loan compromise is not where its at. The real issue is the "forgiveness" of certain student debt, in the service of radical designs - http://adinakutnicki.com/2013/07/01/americas-community-organizing-grads-poised-to-become-foot-soldiers-for-obama-inc-as-the-radical-in-chief-forgives-student-debt-say-what-commentary-by-adina-kutnicki/

This is tragically what happens when a "community organizing" radical becomes POTUS. To be sure, the most revolutionary sorts gave him a helping hand into the White House, and not only from the red side. Greens/Islamists were more than facilitators.

This is also precisely why radical reds, and Muslim Brotherhood Mafia thug,s are running loose in every power center in Washington, even in the White House!

Adina Kutnicki, Israel http://adinakutnicki.com/about/
40 weeks ago
40 weeks ago Link To Comment
This is yet another example of how Republicans are the Stupid Party.

To fight Liberals, don't attack them from the right; they expect that. Attack them from the left (see Rules for Radicals).

Republicans should propose that student loans be interest-free. Not only would you gain some approval from the student demographic you would force the Dems defend their position.
40 weeks ago
40 weeks ago Link To Comment
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