Faced with a looming July 1 deadline, the Senate was unable to reach a compromise on student loans last night, which means the interest for new subsidized Stafford loans used by hundreds of thousands of students will double to 6.8 percent next week.
Although Senate Democrats pledged to have a ?oor vote on a revised approach after the July 4 recess that would extend the current rate of 3.4 percent for one year and make it retroactive to July 1, there is no guarantee that bill can pass the Senate or the House.
"If we don't act by Monday, 7.4 million students nationwide will see their interest rates double," said Sen. Kay Hagan, adding that this would "effectively stick those students with an extra $1,000 a year each of additional loan costs." More than 360,000 low- and moderate-income college students in Ohio use the loan, according to Sen. Sherrod Brown, D-Ohio.
At a news conference Thursday, Hagan, D-N.C., and Sen. Jack Reed, D-R.I., unveiled the revised approach. Their bill, which won the backing of Brown and more than 30 other senators, would be voted on after lawmakers return from the July 4 recess.
"There's a lot of activity out there and people upset but we can't get the House to do anything and enough Republicans in the Senate just want to let the interest rates go up," Brown said.
Taylor Stepp, president of Ohio State University's undergraduate student government, said he was "really frustrated because it seems like they are playing politics on this issue."
"With the rising costs of college, students can't be expected to pay a few extra thousand dollars in debt a year'' if the interest rate doubles from 3.4 percent to 6.8 percent.
The added interest will tack on an extra $38 per month to the loan payment of an average student, said Kathy McEuen Harmon, assistant vice president and dean of admission and financial aid at the University of Day-ton. A little under a quarter of UD students are eligible for the subsidized loan, she said.
Harmon said the good news for students is that the government now offers income-based repayment options on federal loans. There are programs that base monthly payments on a borrower's income and then forgive the balance in as little as 10 years, depending on the graduate's career field.
Because most loans will not be distributed until August, Congress does have some wiggle room to take action later and make its decision retroactive, said Kim Jenerette, executive director of financial aid at Cedarville University.
At a news conference on Capitol Hill, House Speaker John Boehner, R-West Chester Twp., charged that "interest rates on student loans are about to double because the president and Senate Democrats won't resolve this impasse."
The House in May approved its version of the bill, tying the interest rate to a formula made up of the 10-year Treasury note plus 2.5 percent. The House bill would cap interest rates at 8.5 percent.
But Sen. Rob Port-man, R-Ohio, and other lawmakers suggested a compromise would be reached after the recess.
"If you look at the proposal from the White House and the proposal from Senate Republicans, they're very similar," Portman said, adding that both plans go "to a market-based interest rate that helps all students, not just subsidized Stafford loans but all of them. We're not far apart."No deal reached to keep student loan rates from going up Monday »