Skepticism from Democrats Over Student Loan Bill

On July 1, the rate that undergraduates pay for federal student loans (subsidized Stafford) doubled from 3.4 percent to 6.8 percent.  Senate Democrats are increasingly divided over the bipartisan student loan rates bill blessed by leadership last week.  The bill S. 1238, which failed a procedural vote back on July 10^th, is expected to come to a vote as early as today with strong bipartisan support even though a number of Democrats have publicly blasted the bill, including Sens. Elizabeth Warren (D-Mass.), Bernie Sanders (I-Vt.), Jack Reed (D-R.I.) and Richard Blumenthal (D-Conn.).  As the bill took weeks to get bipartisan support behind it, Sanders and Reed both, want to include their amendments that would sunset the bill after two years when interest rates are expected to rise while Reed wants a more stringent cap on loan rates.  The proposed bill “as is”, mainly written by Sens. Joe Manchin (D-W.Va.) and Richard Burr (R-N.C.), would tie student loan rates with 10-Treasury notes, capping the rates at 8.25 percent for undergraduates and 9.5 percent for graduate students.  According to Bloomberg, more than 7 million students borrow through the federal Stafford loan program.

According to the Congressional Budget Office, a non-partisan, number crunching agency for Congress reported that the current legislation would increase the deficit by about $30 billion in the first four years then gradually begin chipping away at the deficit thereafter, settling at $715 million in deficit reduction over the next 10 years.   Consequently, Sanders and Reed’s proposal would increase federal spending, as the lower caps would eat into the government’s student loan revenues in the latter years.   A two-year sunset provision as proposed by Sanders would increase the deficit by more than $20 billion.

Related articles

• Dems divided over student loan bill (politico.com)
• Elizabeth Warren, hard-liner (politico.com)
• Without Congressional Action…. Double Trouble for Students (thegeniusway.me)

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