Coming back from a week-long recess, Congress on Monday resumed its usual business — trading partisan blame for the lack of action on the higher interest rate on federal student loans.
Standing in front of rows of silent students on the steps of the Capitol, House Speaker John Boehner, R-Ohio, said in a brief news conference Monday, "The White House and Senate Democrats have let these students down. And frankly, I think they deserve better."
Some action may come Wednesday, when the Senate takes up one piece of legislation designed to reinstate a lower interest rate for another year. While that solution effectively amounts to kicking the can down the road, it may be the best Congress can hope for with other pressing issues — like a new farm bill and and immigration reform — on the docket this summer.
At the House Republican news conference, student protesters made clear that they're expecting Congress to get moving not just on this issue but also immigration reform. "Up, up with education, down, down with deportation!" the young crowd chanted.
Last week, because Congress can't come to an agreement on the student loan issue, interest rates on federal student loans doubled from 3.4 percent to 6.8 percent. Both Democrats and Republicans say they are in favor of lower rates, but they disagree over whether or not to tie the interest rate to financial markets.
A bill passed in the Republican-led House would peg rates to the U.S. Treasury borrowing cost, plus 2.5 percent. The nonpartisan Congressional Budget Office projects could save the government $3.7 billion over 10 years. Congressional Democrats, however, object to filling government coffers with money from students, pointing out that students would likely pay higher and higher rates under the GOP plan.
"Right now, what they've done over there is worse for students than doing nothing at all," Senate Majority Leader Harry Reid, D-Nev., said on the Senate floor Monday. "The legislation passed by the House would balance the budget on the backs of struggling students — would attempt to balance it, at least."
The higher rate won't impact existing student loans, but it will impact the seven million people who will take out a loan this year. According to CBS News analyst Mellody Hobson, a higher rate could have a noticeable impact on the economy. Debt takes a toll in various ways; for instance, someone with student loan debt is 36 percent less likely to own a home. The Federal Reserve on Monday reported that automobile loans and student loans rose $13 billion in May. While the Fed doesn't separate those two categories in its monthly consumer credit report, the increase has been driven by student loans.
The legislation on the table now in the Senate would simply extend the 3.4 percent rate for another year to buy lawmakers more time to broker an acceptable compromise.