December 8, 2024

Senate Approves College Student Loan Plan Tying Rates to Markets

WASHINGTON — The Senate on Wednesday approved a bipartisan plan that would tie interest rates for college student loans to the financial markets, bringing Congress close to finally resolving a dispute that caused rates to double on July 1.

But the 81-18 vote, which drew overwhelming support from Republicans, masked deep divisions among members of the Senate Democratic caucus. Seventeen of them voted “no.”

Many liberals, who are upset that the plan would replace the fixed-rate subsidized federal student loan program, criticized their colleagues for leaving lower- and middle-income students vulnerable to swings in the market.

As the bill was debated, a discordant scene played out as conservative Republicans like Richard M. Burr of North Carolina praised the Democrats they had worked with to strike a deal, and liberal senators like Elizabeth Warren, Democrat of Massachusetts, and Bernard Sanders, independent of Vermont, accused their colleagues of forcing through a bill that betrayed their party’s promises to working-class families.

“What I don’t understand,” Mr. Sanders said, “is when you have a Democratic president, a Democratically controlled U.S. Senate, why we are producing a bill which is basically a Republican bill?”

Noting that the government stood to bring in nearly $200 billion over the next 10 years because of the higher rates, Ms. Warren denounced the bill.

“This is obscene,” she said. “Students should not be used to generate profits for the government.”

House Republicans, who had approved a plan similar to the one the Senate passed, although with slightly higher loan rates, are expected to pass the Senate bill before Congress leaves for its summer recess next week.

Republicans did not even try to contain their delight that a plan they championed had passed over the objections of liberal senators. Speaker John A. Boehner’s office released a chart comparing the House bill with the Senate bill, noting wryly, “The final legislation is a permanent fix, and it protects taxpayers by not adding to the deficit — things that never would have come to pass if Senate Democrats had gotten their way.”

The Democrats defected despite arm-twisting from Senator Harry Reid of Nevada, the majority leader, and deep involvement from the White House, which supported a market-rate compromise.

The White House was pressing for a fix to rates on Stafford loans, which jumped to 6.8 percent from 3.4 percent on July 1 after Congress failed to come up with a plan to replace the rate structure that expired last summer. Congress had also failed to reach an agreement then and just extended the rates a year.

In that sense, the trouble over student loans was like so many other disputes on Capitol Hill today: self-inflicted and prolonged.

“Congress has trouble with deadlines. I think we all know that,” said Senator Joe Manchin III, Democrat of West Virginia, who helped broker the deal. “We’re here today trying to fix the problem we have with the government’s student loan programs because we kicked the can down the road last year.”

The Obama administration estimated that the fix would help 11 million borrowers who will take out loans this school year. The new rates would apply retroactively to people who had borrowed since July 1.

Under the new rate structure, loans to undergraduates, graduate students, and their parents under the PLUS program would be subject to a fixed rate tied to the 10-year Treasury note — specifically the yield on the 10-year note as determined by the last auction held before each June.

Rates for loans taken out after July 1 of this year would be 3.9 percent for undergraduates, 5.4 percent for graduate students and 6.4 for those receiving PLUS loans. The rates would be fixed over the life of the loan.

In a compromise that pleased many Democrats who had initially been wary of using a rate that fluctuated with the markets, Congress set a cap on all loans: 8.25 percent for undergraduates, 9.5 for graduate students and 10.5 for PLUS recipients.

Liberal critics said that while interest rates are low now, forecasters predict they will rise considerably.

Article source: http://www.nytimes.com/2013/07/25/us/politics/senate-approves-college-student-loan-plan-tying-rates-to-markets.html?partner=rss&emc=rss

In Effort to ‘Rebalance,’ Europe Appears Committed to Austerity Plan

BRUSSELS — Jacob J. Lew, the United States Treasury secretary, urged European officials to adopt more growth-friendly policies on Monday. But there was little indication that the recession-plagued European Union was moving away from the austerity path it has pursued to deal with the debts and imbalances that emerged in the financial crisis of 2008-9.

At the outset of a joint news conference with Mr. Lew, Herman Van Rompuy, the president of the European Council, emphasized the difficult climate that both economies faced.

“We continue to rebalance and rebuild our economic potential to ensure strong, sustainable and inclusive growth and jobs going forward,” Mr. Van Rompuy said. “It is a long and difficult process, but one we stick to with determination on both sides of the Atlantic.”

But despite Mr. Van Rompuy’s reassuring words, it was clear that deep divisions remain between the American and European approaches to the crisis, which have contributed to the divergent paths the economies of Europe and the United States have followed in its wake.

“Our economic recovery is gathering strength,” Mr. Lew said. “The U.S. economy has expanded for 14 consecutive quarters, and although the pace of job creation is not as fast as we would like, the private sector has added jobs for 37 straight months.”

In contrast, the euro zone continues to struggle with shrinking economies and rising unemployment, with Germany, France and Spain all contracting in the fourth quarter of 2012. That has made meeting Europe’s goals of reducing fiscal deficits even harder.

The question that Mr. Lew came to Europe to raise is how to strengthen the European economy — for the Continent’s sake, as well as for the global economy’s. The United States has an investment in Europe’s growth, American officials have said repeatedly, because of the deep financial and trade ties between the countries.

“We have an immense stake in Europe’s health and stability,” Mr. Lew said. “I was particularly interested in our European partners’ plans to strengthen sources of demand at a time of rising unemployment.”

The Obama administration has urged countries with stronger economies, like Germany, to slow their pace of fiscal retrenchment and ease off on demands for tougher cutbacks in hard-hit countries like Greece, Spain and Portugal. In the last few years, such advice has often fallen on deaf ears, given the political constraints in Europe and many officials’ belief in budget balance as a prerequisite to growth.

Mr. Van Rompuy mentioned the “vivid debate” over “fiscal policy and the pace of fiscal consolidation” in his remarks. He pointed out that some countries have been given additional time to meet the euro zone’s deficit goals. But Mr. Van Rompuy reaffirmed the Continent’s strategy, rather than indicating a change in direction despite the rising unemployment and worse than expected contraction.

“The European economies face a high level of debt, deep structural medium-term challenges and short-term economic headwinds that we need to confront,” he added. “There is no room for complacency.”

The trip is Mr. Lew’s first to Europe as Treasury secretary. Earlier this year, he visited Beijing in his first trip abroad in the post. Though he worked for a time in the State Department in the Obama administration, Mr. Lew is primarily known as a domestic budget expert.

In contrast, his predecessor, Timothy F. Geithner, was an international finance specialist who had previously worked at the International Monetary Fund and as Treasury under secretary for international affairs. During his tenure, Mr. Geithner repeatedly pressed his counterparts in Europe to ease up on austerity, though without much success.

On Monday, the French government canceled a meeting between Mr. Lew and his counterpart, Finance Minister Pierre Moscovici, with a scandal over a former budget chief’s offshore accounts brewing. But late Monday evening, the meeting was rescheduled for Tuesday afternoon in Paris, the Treasury said.

Later on Monday, Mr. Lew also met in Frankfurt with Mario Draghi, president of the European Central Bank. He is scheduled to travel to Berlin on Tuesday to see Wolfgang Schäuble, the German finance minister.

Earlier on Monday, Mr. Lew met with other European officials, including José Manuel Barroso, the president of the European Commission, the executive arm of the European Union.

A Treasury official said they, too, discussed the need for Europe to generate more demand, as well as the situation in Cyprus, a cross-border banking union and a prospective free-trade agreement.

Article source: http://www.nytimes.com/2013/04/09/business/global/us-treasury-chief-talks-of-growth-in-europe.html?partner=rss&emc=rss