Student-Loan Deal May Not Pass With Democratic Majority

Michael Catalini

Senate Democratic leaders are negotiating whether to allow votes on a handful of amendments from liberal lawmakers to a bipartisan agreement reached last week on student-loan rates, according to Democratic leadership aides.

The discussion reflects liberal unease with the agreement announced last week and raises the likelihood that it may not pass with a Democratic majority. Democratic vote-counters now put the number of likely votes from their party “in the low 20s,” according to a leadership aide.

That scenario raises the possibility that Majority Leader Harry Reid, D-Nev., might be in position to violate the so-called Hastert Rule, an uncodified principle that legislation should not be brought to the floor without support from a majority of the majority party. Reid has criticized House Speaker John Boehner for adhering to the rule, but he now faces the prospect of needing opposition support to pass the student-loan agreement.

“There’s a good chance we’ll end up violating the Hastert Rule,” a Democratic leadership aide said. “But we don’t consider that to be a big deal.”

Republicans interpret the prospect of Democratic amendments differently, arguing that freighting the agreement with amendments could stall the whole process. For Republicans, the deal was the deal.

“Reid has to get his guys in line,” a GOP leadership aide said.

Democratic aides described the amendment process as fluid, but the list of possible changes included submissions from Sens. Bernie Sanders, I-Vt., Patty Murray, D-Wash., Jeff Merkley, D-Ore., and Jack Reed, D-R.I.

Last week, Reed announced his opposition to the agreement in a statement, and Sanders said he favors returning to the 3.4 percent interest rate of subsidized Stafford loans that was in place before the rates doubled on July 1.

The agreement, called the Bipartisan Student Loan Certainty Act, whose architects include Sens. Lamar Alexander, R-Tenn., Richard Burr, R-N.C., Tom Coburn, R-Okla., Angus King, I-Maine, Joe Manchin, D-W.Va., and Dick Durbin, D-Ill., would tie interest rates to the 10-year Treasury note and fix rates for the life of the loan. The 10-year Treasury note, currently at 1.81 percent, is expected to rise in coming years.

Under the bill, an additional 2.05 percent would be added on top of the Treasury note percentage for all undergraduate Stafford student loans. If the measure passes, interest rates on subsidized and unsubsidized loans would drop to 3.86 percent this year. Rates on individual loans can’t exceed 8.25 percent.

Interest rates on graduate loans would equal the rate on the 10-year Treasury note plus 3.6 percent, and caps on those loans would be at 9.5 percent. Rates on PLUS loans—available to graduate students and parents of undergraduates—would equal 4.6 percent plus the rate on the 10-year Treasury note, with a cap at 10.5 percent.

The Congressional Budget Office estimates the bill would reduce the deficit by $715 million over 10 years.

A vote on the deal, which was expected to come as early as Tuesday, is now “TBD,” but likely this week, leadership aides say.