Senate group gets deal on student loans

A bipartisan group of senators say they have a deal on student loan rates, but a spokesman for Senate Majority Leader Harry Reid (D-Nev.) says it will not pass the Senate.

Sen. Richard Burr (R-N.C.) said the emerging deal would have undergraduates pay a loan rate equal to 1.85 percent above the 10-year Treasury rate, an agreement that would reflect a proposal included in President Obama’s budget plan.

{mosads}Graduate students would pay 3.4 percent above the 10-year Treasury rate, while parents of students who take out PLUS loans would pay 4.4 percent above the 10-year Treasury rate.

The rates would reset every year depending on the yield on the 10-year Treasury note, but students would pay the same rate over the life of the loan once they locked in their rate.

Burr negotiated the deal with Sens. Lamar Alexander (R-Tenn.), Tom Coburn (R-Okla.), Joe Manchin (D-W.Va.) and Angus King (I-Maine), and said other Democrats could soon sign on. 

“There may be another Democrat in the next five minutes,” said Burr.

Manchin confirmed Wednesday that he has signed on to the agreement.

“We’re working on it but I’m signed off,” he said.

Manchin said he hopes to get additional Democrats.

“I hope that people start looking at truly compromising and working on something that fixes it,” he said. “We’re fixing it for all three categories, not just the Stafford-subsidized [loans].”

But Adam Jentleson, a spokesman for Reid, signaled the deal would not be supported by the broader Democratic Conference.

In a statement, he said there was no deal because of opposition from House Republicans to offsetting the cost of the loan rates by raising other taxes.

“There is no deal on student loans that can pass the Senate because Republicans continue to insist that we reduce the deficit on the backs of students and middle-class families, instead of closing tax loopholes for the wealthiest Americans and big corporations,” he said in an email.

“Democrats continue to work in good faith to reach a compromise but Republicans refuse to give on this critical point,” he added.

Burr said he thought House Republican leaders would approve the deal.

“I think the House would find this accommodating to them,” he said.

The House last month passed a bill that would peg student loan rates to the interest rate of 10-year Treasury notes plus 2.5 percent. Under the proposal, the rate for Stafford loans would fluctuate from year to year but could not exceed 8.5 percent. The rate for Direct PLUS loans for graduate students and parents would be set at 4.5 percent above the Treasury rate and capped at 10.5 percent.

Reid and other Democrats want to extend current law, which sets the rate for subsidized Stafford loans at 3.4 percent. They say it should be paid for by closing corporate tax loopholes, according to a senior Democratic aide.

The rates are set to jump to 6.8 percent on July 1 without action by Congress.

—This story was first posted at 12:50 p.m. and has been updated.