White House ‘strongly supports’ Senate student loan plan

The White House said Wednesday it “strongly supports” a Senate compromise on student loan interest rates that has left several liberal Democrats dissatisfied.

In a statement of policy, the Obama administration called for the Senate to pass the bill, calling it “an important step toward making college more affordable for all Americans.”

The compromise would tie the cost of new federal college loans to the government’s cost of borrowing, allowing rates to rise and fall with financial markets and the economy.

{mosads}House Republicans and the White House had pushed similar market-based proposals for the nation’s student loan programs, but Democrats in Congress had pushed for a freeze of lower rates.

The borrowing rate on subsidized Stafford student loans doubled to 6.8 percent on July 1, while Congress haggled over the policy.

The Senate proposal, which House Republican leaders look to be willing to take up, would lead to lower borrowing rates for students now, but could lead to higher rates in the future. The measure caps interest rates at 8.25 percent, leading some Democrats to argue it is better to do nothing at all and stick at the 6.8 percent than pass the bill.

The Senate is set to vote on the bill today and will also consider a number of Democratic amendments to it. Senate Majority Leader Harry Reid (D-Nev.) said Tuesday he was confident the bill would pass with a majority of Democrats behind it.

The White House had previously threatened to veto the House’s market-based approach. While the Senate bill is broadly similar to the House GOP plan, the White House said in its latest statement that the former does not include certain “flaws” present in the House measure.

In particular, the White House cited the rate cap, the fact that students can lock in an interest rate when taking out the loan, as well as the small amount of deficit reduction that is comes with the Senate bill (the Congressional Budget Office estimates the Senate bill would reduce the deficit by $715 million over a decade) as reasons for support. The House plan would have reset student loan rates every year.

Administration officials advocated for the Senate bill Tuesday as well. Education Secretary Arne Duncan called the measure a win for students and urged prompt passage.