Congress is poised to conclude a drawn-out debate over student loan rates this week, and President Barack Obama has hailed the impending deal as a “major victory for the nation’s students.”
But Vermont’s congressional delegation isn’t partaking in the bipartisan compromise.
When the Senate passed the bill last week, Sen. Patrick Leahy, D-Vt., and Sen. Bernie Sanders, I-Vt., were two of 18 senators who opposed it. Rep. Peter Welch, D-Vt., also plans to cast a “nay” vote when the bill reaches his chamber, which could happen as early as Wednesday.
The Senate plan ties Stafford loan interest rates to the 10-year Treasury note, subjecting them to the ebbs and flows of the financial markets. It puts caps on how high those rates can climb — 8.25 percent for undergraduate loans, 9.5 for graduate students, and 10.5 for PLUS loans, which are available to parents and graduate students.
Subsidized loan rates doubled from 3.4 percent to 6.8 percent July 1 after Congress failed to reach a long-term solution for setting the rates. The White House ratcheted up the pressure in recent weeks, calling on Congress to come up with a bipartisan fix.
So why aren’t Leahy, Sanders and Welch on board?
According to Congressional Budget Office estimates, the new plan will keep rates low for the next several years — for the upcoming school year, they’ll be 3.9 percent for undergraduates, 5.4 percent for graduates and 6.4 percent for PLUS loans.
But Vermont’s congressional delegation is perturbed by what’s forecast to start taking place two years down the road.
If CBO economic predictions hold true, 2015 will be the tipping point, when rates will surpass where they were last spring.
Welch, who’s part of a group trying to end the partisan paralysis in Congress, said withholding his support for the student loan deal was a “trade-off.”
“I do have some appreciation for the fact that the Senate bill is a bipartisan compromise that’s actually a much better deal for the kids currently in school,” Welch said.
But Welch said he found it unacceptable that the Senate bill does away with subsidized Stafford loans, which offered lower rates to undergraduates in lower-income brackets.
The loans in question were named after former Vermont Sen. Robert Stafford, who, Welch said, “would be appalled” by the bill that Obama and a number of Democrats are supporting.
Sanders has accused the White House of making “deceptive claims” about the deal.
“The White House is being disingenuous and is trying to sweep under the rug big increases in interest rates for students and parents in the near future,” Sanders said in a statement.
During a speech on the Senate floor, that was well-documented by the media, Sanders chastised Obama and the Democratic-run chamber for selling out to Republicans.
“What I don’t understand is when you have a Democratic president, a Democratically controlled U.S. Senate, why we are producing a bill which is basically a Republican bill?” Sanders said.
Sanders pushed for a two-year sunset on the deal, a move that Leahy backed also, but the amendment failed.
Welch said some of his Democratic colleagues who support the deal are banking on the hope that they can make adjustments to the law that would keep rates lower in the long-term.
Asked whether he thought the current political climate in Congress would allow for that, Welch said: “It’s a tough environment here. Let’s hope so.”
The congressional delegation is also rankled by the profits the federal government is expected to reap under the new plan.
Leahy expressed his displeasure with this component of the deal in a statement July 24. He called it “a mere patch on a much larger problem.”
“Under the new student loan bill, the federal government will make an additional $715 million in profits over the next decade, and all of the profit is coming from the pocketbooks of students and their families,” Leahy said.
