After the Democratic-led Senate on Thursday announced it had come toon 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."
"Even 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.
The 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.
Interest 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 Senateit.
Pressure 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.