WASHINGTON -- With 10 days remaining until the interest rate doubles on new, federally subsidized student loans July 1, a bipartisan group of senators is said to be working out a compromise -- but whether a bill that can pass both houses of Congress is achievable before the rates increase is still unclear. The compromise would base interest rates on the 10-year Treasury note (as would plans from Senate and House Republicans and from President Obama). Rates would vary from year to year for new loans, but would be fixed over the life of the loan -- as was the case in Obama's plan, and in the Senate Republican proposal. The plan would cap interest rates at 8.5 percent.
It's unclear whether the plan will catch on broadly among Senate Democrats, who have resisted shifting to a market-based rate and instead advocated for a one- or two-year extension of the 3.4 percent rate so that Congress can tackle the issue when it reauthorizes the Higher Education Act, which expires at the end of next year.