(Replaces second paragraph to drop 'not,' show vote was to move
By Elvina Nawaguna
WASHINGTON, July 10 The U.S. Senate on Wednesday
blocked a bill that offered a temporary fix for American
students facing a steep increase in loan interest rates.
Senators voted 51 to 49 in favor of moving forward with the
bill. But it didn't meet the 60-vote minimum threshhold to move
on to the floor. The bill would have frozen interest rates on
federal Stafford loans for undergraduate students at 3.4 percent
for a year while lawmakers work on a long term solution.
Interest rates on federal Stafford loans doubled to 6.8
percent last week when squabbling lawmakers failed to meet a
July 1 deadline to prevent the automatic increase.
Republicans and Democrats agree that student loan interest
rates should be kept low but disagree on how to do that.
Democrats wanted to extend the low rate for another year
while working on a long-term solution, but they did not win
enough Republican support in the Senate for the bill to be
Colleges start opening for the new school year next month,
and students who take out new loans originated after June 30
could end up paying up to $4,000 more on their loans by the time
they complete a four-year degree.
The bill would have ensured that future federal student
loans would carry a fixed 3.4 percent rate and would prevent
students who took out loans since July 1 from paying the higher
"Today's failure to reach a deal on student loan rates is a
disappointment," said Anne Johnson, director of Campus Progress
at the Center for American Progress. "Students and families
can't afford a hike in college costs, but that's exactly what
they'll face this fall if the partisan back-and-forth
The group has been leading students to Washington to press
lawmakers to keep interest rates from escalating. More than 7
million students will be affected by the rate increase.
Student loan debt in the United States now exceeds $1
trillion and is already affecting borrowers' financial decisions
such as purchasing homes, cars or saving for retirement.
Higher interest rates, lawmakers and economists fear, will
make higher education less attainable and saddle young people
Democratic Senator Jack Reed, who sponsored the proposal
blocked by the Senate, said that if lawmakers acted swiftly on a
retroactive fix the Department of Education had agreed to change
its borrowing program to keep new borrowers from paying the new
"Helping students is the right thing to do and a smart way
to strengthen our economy," Reed said. "But once again, while a
majority of Senators voted to keep student loans affordable,
some Senators used procedural tactics to block help for
Congress delayed confronting the issue in 2012, an election
year, and let the July 1 deadline arrive without acting.
Before the Senate vote, the Obama administration said it
supported the Reed bill, saying that the plan would give
students the certainty of fixed interest rates and help make
college affordable for needy students.
Meanwhile, senators including West Virginia Democrat Joe
Manchin and North Carolina Republican Richard Burr, are pushing
what they are calling a bipartisan market-based bill.
That plan would peg interest rates every academic year to
the 10-year Treasury borrowing rate, plus 1.85 percent for
undergraduate Stafford loans.
That bill mirrors another Republican bill that passed in
the House of Representatives in May, but continues to be
criticized by Democrats and has been stalled.
But Senate Majority Leader Harry Reid has said he will not
allow any bill that leaves students exposed to the whims of
market interest rates, which are expected to rise as the economy
Republicans have accused Democrats of seeking only a
temporary patch. Democrats accuse Republicans of touting plans
that could raise the college costs and unfairly target families
to fund the nation's deficit.
(Reporting by Elvina Nawaguna; Editing by Doina Chiacu and
Marilyn W. Thompson)