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Student loan rates may double after bills fail in US Senate
By Sarah Brown | The Daily Tar Heel

Two competing proposals touted as solutions for a pending increase in federal student loan interest rates both failed a test vote in the U.S. Senate Thursday.

Neither bill achieved the 60-vote majority needed to end floor debate and move forward. The interest rate on new subsidized Stafford student loans is set to double from 3.4 percent to 6.8 percent July 1, unless Congress acts to change them.

The Smarter Solutions for Students Act, introduced by Rep. John Kline, R-MN, and Rep. Virginia Foxx, R-NC, would tie student loan rates to market forces by allowing for a variable interest rate each year with a set cap.

The bill passed the House two weeks ago with bipartisan support.

Kline said in a statement that the bill answers President Barack Obama’s call for a long-term solution to student loan woes that are plaguing low-income and working class families.

“The Senate has a chance to do the right thing and advance a similar plan, opening the door for bipartisan negotiation and agreement,” he said.

But Senate Majority leader Harry Reid, D-Nev., said he would not support Kline’s proposal because he wants to freeze the rates for two more years.

A different bill introduced by Sens. Jack Reed, D-R.I. and Tom Harkin, D-Iowa — known as the Student Loan Affordability Act — proposes three tax breaks to make up for keeping the rates low.

“This is exactly the kind of common-sense proposal we need to keep our economy growing,” Reid said in a statement.

Obama, who came to UNC’s campus last year in advance of the presidential election to drum up support for lower student loan rates, has said he supports a market-based plan similar to the Smarter Solutions for Students Act.

But Obama’s proposal would freeze the initial interest rate for the life of the loan, while the Republican version would allow rates on all loans to adjust each year, with an 8.5 percent cap.