The U.S. Senate deadlocked Thursday over federal student loan rates, narrowing their window to prevent rates on certain loans from doubling for about 7 million borrowers on July 1.
With rates for new subsidized loans scheduled to jump to 6.8 percent in roughly three weeks unless Congress acts, competing bills fell short of the 60 votes needed to overcome a filibuster in the Democratic-led upper chamber.
Republicans blocked a Democratic plan, supported by U.S. Sens. Amy Klobuchar and Al Franken, that would lock in the current 3.4 percent rate for subsidized loans two years, allowing Congress more time to debate an overhaul of federal lending.
Klobuchar and Franken were among the Democrats who thwarted a Republican proposal that would tie loan rates to the yield on the government's 10-year Treasury bill, plus 3 percentage points.
The issues hits home for lawmakers in Minnesota, where the average college graduates leaves school with nearly $30,000 in debt.
"... the last thing Congress should do is saddle future graduates with more debt," Franken said in a statement. "I'm disheartened that today we weren't able to prevent the interest rate on subsidized Stafford loans from doubling, but I will keep fighting until we get the job done."
Like their colleagues in the Senate, the Republican-led House already passed legislation that would link students' loan rates to financial markets. The House plan, written by Republican U.S. Rep. John Kline, would reset interest rates every year, but include a cap on interest rates facing students.
President Obama threatened to veto his legislation, arguing that the plan would create uncertainty for students and families beacuse the rates would rise or fall with the market each year.
Thursday's developments frustrated Kline, chairman of the House Education and the Workforce Committee.
"The Senate showed us again today that they can't get anything done," he said. "They can sit back and criticize us, but they need to pass something."
Last year, with the July 1 deadline looming, lawmakers approved a one-year extension of the 3.4 percent rate.
This year, committee leaders, including Kline, hoped to hammer out deals in their respective chambers before coming together to iron out the differences before the cutoff date. But the prospects for compromise seem dimmer this time around, lawmakers said Thursday.
The Democratic Congressional Campaign Committee has launched online and print ads in six college newspapers that single out Republicans, including U.S. Rep. John Kline, on the issue of student loan rates.
The ads will run in the Minnesota Daily, the campus newspaper of the University of Minnesota, which is not in Kline's district.
With the rate on federally subsidized student loans set to double on July 1 if Congress doesn't act, lawmakers remain divided over a solution. Without an agreement, the loan rate for undergraduate students would double, rising from 3.4 percent to 6.3 percent.
Last week, House Republicans passed Kline's plan to address the pending increase by switching loan rates to market-based system. But it's unlikely to become law because Democrats don't approve of it. The day before the House approved Kline's legislation, the White House threatened to veto it, arguing that the plan would create uncertainty for students and families.
For the second consecutive summer, the pending rate hike will be a hot-button issue for college students across the country. On average, Minnesota college students graduate with a $30,000 loan debt.
During an event at the White House today, President Obama publicly called on Cognress to prevent the loan rates from doubling. Like Kline, Obama has also voiced support for a switch to market rate loans, which would end the system in which rates are set by Congress.
Kline, the chairman of the House Education and the Workforce Committee, spent Thursday touring campuses and meeting with students in his district.
"It's time for the president to stop politicizing the student loan issue," Kline said in a statement today. "Instead of holding campaign-style events, the president should urge his Senate colleagues to put forward their own plan to solve the problem."
Facing a similar deadline on the student loan issue last summer, Congress simply extended the 3.4 percent rate for another year. Now the matter has resurfaced, with little more than four weeks until zero hour.
The DCCC would not reveal how much they're spending on the ad campaign against Kline.