Susan Davis, USA TODAY
WASHINGTON-Congress is about to miss a July 1 deadline to head off an impending doubling of college loan rates. But key negotiators say a deal is within sight and likely to be reached after Congress returns from the July 4 break.
"We'll have something completed, finalized, finished before we leave tomorrow," said Sen. Joe Manchin, D-W.Va., a conservative Democrat who announced a bipartisan deal with four additional senators late Wednesday. "I think that it will be resolved after (the break) and be retroactive."
Without action, student loan rates will double from 3.4% to 6.8% on July 1, affecting about 7 million students taking out new college loans this fall.
Aides familiar with the legislation who were not authorized to discuss it publicly said Congress can retroactively fix the interest rate but should do so before students begin signing promissory notes for their new loans, which traditionally starts in late July. Congress also approved a retroactive loan fix last summer to extend the current 3.4% rate.
However, Senate Majority Leader Harry Reid, D-Nev., and a faction of top Democrats including Senate Health Education Labor and Pensions Committee Chairman Tom Harkin, D-Iowa, pushed back against reports of a deal. "There is no deal on student loans that can pass the Senate," Reid said.
Democrats want a protective rate cap to ensure students will not have to face interest rates on individual loans higher than 8.25%. The current deal does not include any such cap. Harkin has been adamant that he cannot support a bill without a cap. "Any proposal that lacks a cap is a nonstarter," said Allison Preiss, a Harkin spokeswoman.
Manchin, joined by GOP Sens. Richard Burr of North Carolina, Tom Coburn of Oklahoma, Lamar Alexander of Tennessee, as well as Sen. Angus King, I-Maine, released details of the "Bipartisan Student Loan Certainty Act" on Wednesday evening.
The bill would tie all newly issued loans to the U.S. Treasury 10-year borrowing rate and create a three tier system to charge an additional 1.85% for undergraduate Stafford loans, 3.4% for graduate Stafford loans, and 4.4% for PLUS loans, which parents can take for their children. The interest rate would be fixed over the life of the loan.
Senate Minority Leader Mitch McConnell, R-Ky., has signed off on the proposal, according to spokesman Don Stewart, a signal of broad GOP support.
Republicans have trumpeted the proposal as a rare bipartisan accord because it mirrors a policy supported by President Obama in his budget to tie loan rates to the market vs. allowing Congress to determine the rate.