"We’re very close to having everything done. But until we get everything done, nothing’s done.”
That was Senate Majority Leader Harry M. Reid (D-Nev.) commenting yesterday on the run-up to this weekend’s likely vote on student loan interest rates: Unless Congress acts sometime in the next few days, the rate will double from 3.4 percent to 6.8 on July 1. In a departure from its usual partisanship and gridlock, the Senate reached a deal yesterday on how to prevent those interest rates from rising. Both GOP candidate Mitt Romney and President Barack Obama have called on Congress to avert the rate increase. But until yesterday, Republicans and Democrats couldn’t agree on how to pay for the $6 billion cost of maintaining the 3.4 percent rate for another year.
Now, Senate Minority Leader Mitch McConnell (R-Ky.) says he and Reid “have an understanding we think will be acceptable to the House,” according to the Washington Post.
The Senate’s deal would freeze the loan rate at 3.4 percent for one year. It plans to pay for the lower rate by restricting the number of years part-time students can get subsidized loans, and by increasing premiums for federal pension insurance.
Good news for students…or is it?
Clare McCann, a program associate with New America’s Education Policy Program, says the deal – if it does pass - leaves much to be desired. The current agreement means that, “One year from now, [Congress] will be back in the same place, but without the political incentive of the campaign season to drive a compromise."
Perhaps Congress should’ve heeded the advice of Jason Delisle, the director of New America's Federal Education Budget Project. He outlined a “no-cost solution to student loan interest rates” last month, arguing for a policy that would link student loan interest rates to the rate on ten-year U.S. treasury notes. His proposal is detailed here.
“A fix like the one we proposed would be a long-term solution, better for both students and taxpayers,” McCann adds.
And what does she think will happen this weekend?
“The House has indicated interest in reaching an agreement, but whether it’s the Senate deal or a different compromise, or even a shorter 6-month extension (which wouldpush off the issue entirely until after the elections) remains to be seen."
Check out the Ed Money Watch blog for more analysis on the policy debate.