Six Bills Into One Student Loan Deal Won't Go

NEW YORK (MainStreet)--There are six student loan bills in Congress, plus a proposal from the White House. There is one interest rate for subsidized Stafford loans. Come July 1, there will continue to be one interest rate. Whether or not the subsidized Stafford rate will double from 3.4% to 6.8% is anyone's guess.

Three bills are in the Senate, three in the House. Three have long term solutions, three are short term. Then there is the Obama administration's plan, which the Republicans say is so much like their House bill that President Barack Obama favors partisanship over a solution by not adopting it. Obama, meanwhile, says that the Republican bill would be more expensive to borrowers in the long term than if rates doubled.

Obama may be right, but it's moot at this point. The Democrat's Reed-Harkin bill, which would freeze the current rate for two years, got 51 votes in the Senate but for procedural reasons, needed 60. With fewer than six days before the Stafford loan rate expires, none of these bills currently has a chance.

Lauren Asher, president of Oakland, California-based The Institute for College Access and Success, which has proposed its own remedy--declined to handicap the chances of any of these bills. "I have no idea what's going on in the House or Senate committees," she said.

"There's been a lot of posturing about how there isn't much difference between these proposals when in fact there is a lot," said Asher. "A permanent change that increases the cost for borrowers is worse than no change at all."

"Our view of the Republican bill is that it will pay down the debt on the backs of people with student loans. But we have concerns about Obama's proposal as well. Obama wants an expansion of the income-based repayment plan, but he also puts no cap on how high rates can rise, giving borrowers no protection from rising interest rates. The Obama plan has that in common with the Republican plan. The Republicans and Obama say that having no rate cap is O.K., because of the income repayment plan. We say that this is no substitute for a rate cap."

To qualify for an income-based repayment (IBR), borrowers must have a partial financial hardship, defined by the Department of Education website as when the monthly amount required on your IBR-eligible federal student loans under a 10-year Standard Repayment Plan is higher than the monthly amount you would be required to repay under IBR.