WASHINGTON – A proposal to extend lower interest rates for some federal student loans failed for the second time in the Senate on Wednesday, putting new pressure on
A unanimous bloc of
With Senate Majority Leader
An identical plan faced a similar vote more than a month ago, but Democrats had wanted to try again to advance the plan. The Republican-controlled House has passed its own plan, which Republican leaders say is closer to the approach President
Senate Democrats argued that the one-year extension made sense because Congress is set to take up the reauthorization of the Higher Education Act later this year. By extending the lower interest rates, lawmakers could consider a long-term fix for student loans at the same time they considered other federal aid programs for higher education, including Pell Grants.
The House bill would link student loan interest rates to bond-market rates. Many Democrats oppose that idea, saying that predicted increases would ultimately cause borrowers to face much higher interest on their loans.
But in his 2014 budget proposal, Obama also proposed a market-based plan. His called for restructuring student loan interest rates and linking them to the 10-year Treasury rate, with differing surcharges for subsidized and unsubsidized Stafford loans and PLUS graduate loans.
The House plan, which passed that chamber in May, would involve slightly higher surcharges but would set an overall cap of 8.5% to protect student borrowers against significant rate increases. Under the president's plan, rates would be locked in for the life of a loan, while under the House plan they would reset each year.
A compromise plan proposed by Manchin, King,
As with Obama's plan, the compromise proposal would allow borrowers to repay their loans at a lower rate based on their income, with any debt remaining after 25 years being forgiven.
Reid said Wednesday that negotiations between Democratic leaders and the sponsors of the compromise plan were advancing.
"While imperfect … it will be a way for us to move forward," Reid said.
"I think we've got some options that pique a lot of interest in a bipartisan way," he said.
Senate aides said a revised version of the plan could come to a vote within a week.