Senate Republicans gave a thumbs down to a Democratic plan that would have frozen interest rates for 7.4 million students taking out new federally subsidized Stafford loans.
The vote was 52-45. Sixty votes were needed to avoid a certain Republican filibuster and to move the bill toward debate.
From the Republican perspective, it wasn't the idea of keeping the rate at 3.4 percent rather than letting it double starting in July. The impasse was over how to fund the one-year rate freeze, which would cost the government $6 billion, according to the Congressional Budget Office.
The defeated Democratic bill would have eliminated a tax break for some corporate-stock holders, but Republicans want to pay for it by killing a preventative health care fund that's part of the 2010 health care overhaul law.
President Obama has made an issue of the student loan fight, hoping to paint Republicans as anti-education. But both sides see the political value in the rate freeze, at least on their terms. GOP senators are demanding a vote on their alternative.
According to The Associated Press:
Behind the scenes, aides from both parties have been trying to find a consensus way to pay for the bill. With neither party eager to appear to be causing college students to bear higher costs, conventional wisdom is that eventually a compromise will be struck, but first the political posturing will have to play out.
The political wrangling takes place against a backdrop of some urgency. Student loans have surpassed auto loans and credit cards as the single-largest source of individual debt. A third of undergraduates are more than $20,000 in debt when they graduate, while nearly half of those who pursued a master's degree are.
The New York Times says:
At a time when Americans owe more on student loans than on credit cards — student debt is topping $1 trillion for the first time — and the Occupy movement has highlighted the rising furor over spiraling student debt, the issue has moved higher on the political agenda. But the question of what to do about the looming interest rate increase has landed deep in the chasm separating Democrats from Republicans, who accuse the president of using the issue in a fiscally irresponsible way, in an attempt to buy the youth vote.
The Department of Education estimates that 7.4 million students will borrow $31.6 million in Stafford loans for low- and middle-income students starting July 1, when the rate increase goes into effect. That averages out to $4,226 per student. The rate change is not retroactive.
The loans are usually paid off gradually in the years after graduation.
The White House has said the rate change would add about $1,000 to the total cost of the loan.