The Senate plans to vote at some point this week on a plan that would tie interest rates on new federal student loans to the market, rather than having a fixed rate for years on end.
The plan, created by a bipartisan group of senators, has substantial support from top congressional leaders, many Republicans and President Obama, who took a personal interest in the matter. But a few Democrats hate the proposed plan and are attempting to change it, slowing its path to a vote.
In floor speeches, statements and interviews, opponents have criticized Republicans for commandeering the process and pushing a plan that will save students some money in the next few years but will likely cost future students much more.
Many say they want a wholesale revision of the federal student loan program — which could include refinancing existing loans and confronting the overall cost of college — and not just a rate change. These lawmakers have received the backing of a few student groups that say they would rather have no deal than a bad one.
Sen. Elizabeth Warren (D-Mass.) has been one of the most vocal critics, calling the current plan a "teaser rate loan program" and comparing it to credit card companies that entice students with low introductory rates, only to dramatically increase those rates later. Sen. Jack Reed (D-R.I.) said in an interview Monday that the only certainty provided by what has been dubbed the "Bipartisan Student Loan Certainty Act of 2013" is that rates will go up.
Sen. Bernard Sanders (I-Vt.) urged his colleagues on Tuesday to address the larger "crisis" facing students and to stand up for middle- and lower-class students. In a statement issued on Monday, he called the compromise "dangerous."
"At a time when Democrats control the White House and the U.S. Senate, we should not support bad legislation almost identical to that passed by a very conservative, Republican-led House," Sanders said in the statement. "Our job is to listen to the people who elected us and stand up for working families and their kids, not make their lives more difficult."
The compromise calls for setting interest rates using the value of the 10-year Treasury bill, plus a percentage add-on. Undergraduates would have the lowest rates, which could go up to 8.25 percent, higher than the current fixed rate of 6.8 percent. Graduate students would pay a higher rate that could go up to 9.5 percent, more than the current rates of 6.8 and 7.9 percent. And PLUS loans, which are taken out by graduate students and parents of students, would have the highest interest rate, which could go as high as 10.5 percent, higher than the current rate of 7.9 percent.
For the next few academic years, the projected interest rates are lower than the current fixed rates. For the coming year, undergraduates would lock-in an interest rate of 3.86 percent, with graduate students having a rate of 5.41 and PLUS loans at 6.41 percent. By 2018, those rates are expected to be at 7.25 percent for undergraduates, 8.8 percent for graduate students and 9.8 percent for PLUS loans — rates that are all higher than the current rates.
