With July 4th Over, Politicians Prep for Student Loan Debate Fireworks

Chip Somodevilla/Getty Images(WASHINGTON) — House Republicans passed a bill earlier this year to address skyrocketing student loan rates, called The Smarter Solutions for Students Act. But with rates doubling this month, and the House criticizing their Democrat colleagues for inaction on the matter, a showdown is brewing on Capitol Hill. 

The GOP says the House bill is “consistent” with an idea President Obama first proposed in his budget request: tying the 10-year Treasury note, along with a 2.5 percent “add on,” to the student loan rates. 

The House and Senate were in recess last week, when rates for future federally subsidized Stafford student loans doubled on July 1 from 3.4 percent to 6.8 percent.

Now that both chambers are back in session, the debate has resumed full throttle.

While Republicans believe they have backed House and Senate Democrats into a corner on student loans, Senate Democrats returned to the Capitol on Monday unrelenting in their claim that House Speaker John Boehner is really to blame for the standoff.

“The House legislation is worse for students than doing nothing at all,” Senate Majority Leader Harry Reid said during a floor speech as the upper chamber reconvened, criticizing Boehner for his insistence on bringing legislation to the House floor only if it is backed by a majority of House Republicans.

“To find a responsible solution to the student loan issue — and every other major issue facing this Congress — the Speaker should work with his Democratic colleagues instead of against them,” said Reid, D-Nev.

Escalating the showdown, the Senate has scheduled a vote for Wednesday on a one-year student loan fix.

Reid Monday pushed forward a Democrat bill to keep the rates at 3.4 percent, applying the fix retroactively to any loans made between July 1, 2013 and June 30, 2014.

The bill is scheduled to face a procedural vote on Wednesday, needing 60 votes to advance.

The House bill would have the student loan rates fluctuate with the market throughout the life of the loan, an element most Democrats principally oppose.

This year, a market interest rate would soften the blow of the current law by setting the rate at 4.4 percent. That rate is generated through a formula that includes the current forecast of the 10-year Treasury Note at 1.9 percent, plus the “add on” of 2.5 percent.

PLUS loans, which are for graduate students and parents of undergrads, would have an “add on” of 4.5 percent.

Before jetting back home for parades and BBQs, a bipartisan group of senators were on the verge of a compromise that would have enacted a remedy tied to market interest rates. That deal, however, was not supported by the Senate Democratic leadership and collapsed almost as quickly as it came to light.

On Monday, Boehner pointed at, “divisions among the president and his own party” as the cause for “the current impasse.”

“We need the president to lead and help bring Senate Democratic leaders along to resolve this issue,” Boehner, R-Ohio, wrote in a statement today. “Republicans have acted. We’ve done our job, it’s time for the president and his party to do their job.”

House Republicans held an event Monday afternoon with up to 100 students to pressure the president and Senate Democrats to pass legislation in the upper chamber.

White House Press Secretary Jay Carney told reporters Monday that the White House is willing to work with Congress, but said “there’s a solution available here that keeps with the president’s principles.”

“There is a way to do this that’s retroactive so that students are spared from having their rates double,” Carney said. “We need to do it in a way that students are guaranteed a low rate and that — and so that they’re not overcharged in order to pay down the deficit. Our views on that are clear.

 “We expect and hope that Congress will fix this problem quickly,” he said. “We believe that it can be done. The differences are not that significant.”

The House passed its plan, H.R. 1911, on May 23, down mostly partisan lines. Just four House Democrats — Reps. Joe Garcia, Dan Maffei, Scott Peters and Jared Polis — supported the measure.

House Minority Leader Nancy Pelosi said Republicans “refused to act to keep interest rates low” and said they “are more interested in finding someone to blame than in seeking a solution.”

“Democrats are ready and eager to resolve this crisis and work across the aisle to restore the lower interest rates and ensure college remains in reach for millions of Americans,” Pelosi said. “For the sake of a stronger economy, middle class, and future, Republicans should work with us to put more young people back in the classroom.”

While rates have already doubled, students can safely presume that a potential agreement will likely be retroactive to July 1 and would almost certainly scale back the harsh increases spelled out in current law.

Copyright 2013 ABC News Radio