We wrote before about the seven pieces of legislation that had been proposed – some in the House, some in the Senate – to address the imminent doubling of interest rates on unsubsidized student loans. But with less than three weeks to go, two of the potential laws have been gunned down and a third has been promised a veto by President Obama. Where does this leave us?
Dead in the Water: S 1003
This Republican backed bill would have tied student loan rates to the 10 year Treasury bill plus 3%. The bill tanked with a 40-57 cloture vote. This means that it went along party lines with most Republicans voting for and all Democrats voting against. As well, several Republicans crossed party lines to help doom the bill!
Dead in the Water: S 953
This Democratic backed bill saw a 51-46 vote that was not enough to gain cloture. S 953 was seen as having a good chance of approval since it simply extended the current 3.4% rate, but the problem was there was a controversial oil spill liability trust fund rider attached that helped doom this bill to a filibuster!
What’s Left in the Senate?
Languishing in committee analysis is S 1066, Senator Kirsten Gillibrand’s act that would lower interest rates and allow low interest rate financing. Senator Elizabeth Warren’s S 897 which would cut rates drastically to align with the Fed Funds rate is also stuck in committee. That’s it for Senate based bills, so it seems like without any rapidly proposed and fast-tracked legislation, this issue is effectively dead in this part of Congress!
What About the House?
Democrat John Tierney’s HR 1979 which like Warren’s Senate bill would set student loans at the Fed Funds rate is in committee. Joe Courtney’s (D-CT) HR 1595 would simply extend the current 3.4% rate is also being reviewed in committee.
One bill that looks quasi-passable (HR 1911) has passed the House, but President Obama has pledged to veto it. This resolution would set student loan rates at the 10-year Treasury note rate plus 2.5% with a cap. Obama has criticized the bill as taking the “wrong approach.”
Is There Any Hope at All?
If partisan politicking continues, then it’s quite possible that the rates would double. This back and forth reminds me of the fiscal cliff where arguments ran strictly along party lines and we technically went over the cliff. After that clock ran out though, a temporary compromise was reached and enacted retroactively and we may see something like this as well.
But…this also resonates the FICA tax debate. It had been temporarily cut to 2% in a “FICA tax holiday” that was intended to be a short-term economic stimulus move. It had been renewed once, but Congress allowed it to expire at the end of last year despite criticism that it would hamper economic growth. Pushback from legislators insisted that the relief was intended to be temporary. So too it is with this 3.4% rate on unsubsidized loans. In 2007, Congress halved the rate from 6.8% to 3.4% – would they take the same tact as they did on the FICA tax holiday and allow the rate to return to what they see as “normal”?
We’ll be keeping a close eye on this story as we creep closer to July 1st and the expiration of the current lower rate and will let you know if there’s any relief! In the meantime, when you’re online downloading the hottest apps, be sure to go to Tuition.io to use our free award-winning student loan management tool to view all of your loans in one easy interface!
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