(CBS NEWS) -- After the Democratic-led Senate on Thursday announced it had come to an agreement
on interest rates on federal student loans, leaders hailed the deal as
long-overdue. Progressive activists are grumbling the deal, which
closely resembles the House Republican bill, would leave students worse
off than doing nothing.
Jim Dean, chairman of Democracy for America, called the deal a "craven attempt to pit today's students against future students."
worse, this raw deal is built on the backwards notion that students are
merely Washington cash cows waiting for the slaughter rather than
national assets to be built up and invested in," he said in a statement.
deal would set undergraduate interest rates at 3.85 percent for another
year. The borrowing rate would be 5.4 percent rate for graduate
students and 6.4 percent for parents. After that, however, the rates
would rise with the market. Undergraduate interest rates for the next 10
years would be capped at 8.25 percent, the graduate interest rate cap
would be set to 9.5 percent, while the parent borrowing rate would be
capped at 10.5 percent.
Liberals have adamantly opposed
tying rates to the market, and even though the compromise sets caps for
how high the rates can rise, activists think Democrats effectively caved
to Republicans on the matter.
"The Senate proposal on
student loans treats students like an ATM," Stephanie Taylor, co-founder
of the Progressive Change Campaign Committee (PCCC) said in a
statement, pointing out that if Congress simply did nothing, the
interest rates would remain lower than the 10-year caps.
rates on federal loans currently stand at 6.8 percent, after Congress
earlier this year failed to extend the lower rate of 3.4 percent. Both
Democrats and Republicans say they are in favor of lower rates, but up
to this point, they have disagreed on whether or not to tie the interest
rates to the market. Democrats earlier this month were pushing a bill
to restore the 3.4 percent rate for another year, to give lawmakers more
time to find a long-term solution, but the Senate rejected it.
has been mounting for Congress to fix the matter, which could affect
seven million Americans taking out student loans this year. According to
CBS News analyst Mellody Hobson, a higher rate could have a noticeable
impact on the economy. Debt takes a toll in various ways; for instance,
someone with student loan debt is 36 percent less likely to own a home.
Senate leaders hesitantly put their support behind it Thursday.
"The legislation as has been presented to me isn't everything I want,
but it's a work of a number of Democratic and Republican senators
working long, long hours," Senate Majority Leader Harry Reid, D-Nev.,
said on the Senate floor Thursday. He noted that the senators who
negotiated the deal met with President Obama Tuesday night for about 90
"We have to get this done as soon as possible," Reid said. The Senate is expected to vote on the measure early next week.
Tom Harkin, D-Iowa -- a key player in the negotiations -- expressed his
dissatisfaction with the measure but suggested there were few other
options left. The Senate could change student loan rates again later, he
Sen. Jack Reed, D-R.I., however, said he's opposing the bill.
clear impact of the legislation that is being proposed is that it will
increase the cost of education for students," he said on the Senate
floor. "We need to ensure our students have an opportunity to earn a
degree without mortgaging their future."
Democrat -- Sen. Elizabeth Warren, D-Mass., has yet to say whether
she'll support the effort. Progressives have largely fallen behind a
bill that Warren introduced to reduce student loan interest rates to
0.75 percent, the same level big banks receive from the Federal Reserve.
and other Democrats have railed against more conservative plans, which
use the money earned from the interest rates to fill government coffers.
According to the Congressional Budget Office, the U.S. will pocket a
record $51 billion in profits this year off new and current federal
student loans. On Wednesday, Warren called those profits "morally wrong"
With the Senate set to vote on the new
compromise early next week, activist groups are mobilizing opposition.
Democracy for America is asking its 1 million supporters to share its loan calculator,
which shows much interest a student would have to pay under the new
plan, compared with what they would pay under other proposals.
for America and other groups like MoveOn.org and PCCC have also been
organizing support for Warren's legislation. More than 600,000 people
have signed a petition in support of the measure, while more than 13,000
have called their senators about it. PCCC, meanwhile, as rounded up more than 1,200 university professors to come out in support of Warren's bill.