A potential bipartisan agreement to lower student loan rates would cost the government $22 billion, a number high enough to send negotiators back to the table, according to a Senate Democratic aide.
A bipartisan group of eight senators had reached a tentative agreement to permanently reform the student loan program, tying how much students pay to the interest rate on U.S. Treasury bills.
The compromise – supported by Sens. Dick Durbin and Tom Harkin, two Democrats who weren’t on board with earlier efforts – would have capped the rates at 8.25 percent for undergraduate loans and 9.25 percent for graduate students. That would lower rates in the short term, but could mean that rates rise above 6.8 percent in the future.
But senators have to readjust after the estimate from the Congressional Budget Office came back Thursday showing the changes would be too expensive for some members of the group.
The eight senators – Republicans Richard Burr, Tom Coburn, and Lamar Alexander, along with Democrats Harkin, Durbin, Joe Manchin, Tom Carper and independent Angus King – plan to adjust the rates in the plan and send it back to the budget office to see if they can lower the cost.
If a final deal is reached, there will likely be a vote before the Senate departs for its August recess, and possibly as early as next week.
The eight lawmakers started working on the compromise almost immediately after a Wednesday vote on a short term fix failed to win 60 votes in the Senate. The vote came after a marathon meeting among Democratic leaders and White House chief of staff Denis McDonough.
That bill failed because Democrats haven't been able to agree on how to proceed on a long-term fix. Carper and Manchin had been pushing for a vote on their compromise bill.
But left-leaning Democrats -- like Sen. Elizabeth Warren, D-Mass. -- didn't want to go along with it.
The split has left students who are in the process of getting loans for this fall in limbo, not knowing what their rates might be. Right now, rates for subsidized Stafford loans -- the loans that help the neediest students -- sit at 6.8 percent. That's twice the 3.4 percent that was in effect until July 1.
The House has already passed a bill that would tie rates to the Treasury bill rates over the long term. It's similar to what President Barack Obama had proposed -- but the president has threatened to veto the House version, in part because it uses savings from it to pay down the deficit instead of reinvesting in students.
This story was originally published on Thu Jul 11, 2013 11:34 AM EDT