Senators attempting to restore lower interest rates on federal student loans are going back to the drawing board after learning Thursday that their latest plan would.
Both Democrats and Republicans say they are in favor of lower rates, which doubled last week from 3.4 percent to 6.8 percent after Congress failed to act. Up to this point, however, they have disagreed on whether or not to tie the interest rates to the market. Last week, a measure that would have restored the 3.4 percent rate for another year -- giving lawmakers more time to find a long-term solution --necessary to pass.
Now, lawmakers are working behind the scenes on a compromise. The latest plan would have pegged rates to the the 10-year Treasury note, with an additional percent to pay for administrative costs. To address Democrats' concerns about higher rates, the plan would have included a cap on how high the rates could be. However, the nonpartisan Congressional Budget Office told lawmakers the plan would cost $22 billion over 10 years.
If Congress fails to address the issue, as many as seven million people taking out new student loans this year will be hit with the higher rate -- creating aon the economy.
A new report, meanwhile, suggests that "debt relief" companies are using deceptive practices to profit off of students attempting to pay back their loans.
The National Consumer Law Center report says private companies are characterizing free federal repayment programs as their own -- and charging students up to $1,600 up front and $20 to $50 in monthly fees to participate in the free programs. A group of 21 Democratic senators Thursday sent a letter to Secretary of Education Arne Duncan, Federal Trade Commission Chairwoman Edith Ramirez and Richard Cordray, the nominee to lead the Consumer Financial Protection Bureau, asking for the government to step in.