WASHINGTON, June 27 (UPI) -- Interest rates on some new federal student loans appear destined to double next week, U.S. senators say, with a Monday deadline looming.
The Senate's attention has been focused on completing a major immigration bill before Congress leaves Friday for a weeklong recess, so the prospects of reaching a quick deal on the student-loan issue are slim, The Wall Street Journal reported Wednesday.
"If I were a betting person I would say it's unlikely it gets done this week," said Sen. John Thune, R-S.D., a member of the Senate Republican leadership.
Without congressional action, the interest rate on new Stafford loans will double from 3.4 percent to to 6.8 percent beginning Monday. The hike doesn't affect existing loans.
Sen. Tom Harkin, D-Iowa, chairman of the Senate Health, Education, Labor and Pensions Committee, said he had hoped to strike a deal with Sen. Lamar Alexander of Tennessee, the committee's ranking Republican, but hasn't been able to do so.
"Everyone's focused on immigration right now," Harkin said. "They haven't turned their thoughts to this. We talked about it in caucus a couple times, but people are focused on the immigration bill."
Alexander and Thune downplayed the significance of the Monday deadline, saying lawmakers could return to Washington in the second week of July and deal with the loan issue retroactively, the Journal said.
"Even if we don't reach a deal at the end of the week ... we do it soon after we get back, then we can put the new system into law and students will have time to plan for the loans they are taking out for this fall," Alexander said.
The federal loan interest rate was to increase last year, but Congress enacted a one-year fix. President Obama has called on Congress to pass legislation to avert the increase this year as well.
The Republican-led House passed a bill that would link the student loan interest rate to the government's borrowing costs and allow a loan's rate to reset annually. Obama proposed tying the rate to the 10-year Treasury note yield, but with a smaller difference between the two, and fix the rate for the life of the loan.
Senate Democrats oppose the House bill, saying it would set the rate too high. Republicans object to a Democratic bill that would freeze rates for two more years, saying it would cost about $8 billion and that they oppose raising taxes or adding to the deficit to cover the cost.