The Senate failed to invoke cloture and move forward S 1238, the Keep Student Loans Affordable Act, which is a measure that would keep the Stafford subsidized interest rate at 3.4 percent for another year.
The vote was 51-49 and 60 votes are needed to invoke cloture, which would end debate on the measure.
However, later Wednesday evening, a bipartisan group of Senators, including Majority Whip Dick Durbin, announced a long-term student loan agreement.
Under the bipartisan agreement, interest rates on new federal student loans would vary based on the market and would be pegged to the 10-year Treasury note, plus 1.8 percent for both the subsidized and unsubsidized portions of the Stafford loan, plus 3.4 percent for graduate loans and plus 4.5 percent for PLUS loans. The deal would be retroactive, so the rates would apply to all loans beginning July 1.
Students taking out those loans today would be charged 3.61 percent in interest for undergraduate loans, 5.21 percent for graduate loans and 6.31 percent for PLUS loans.
The rates would be fixed for the life of a borrower’s loan, and there will be caps. The undergraduate rate would be capped at 8.25 percent while the graduate and PLUS loans would be capped at 9.25 percent.
The proposal also maintains two currently available protections for borrowers. One allows them to consolidate their loans and cap repayment interest rates at 8.25 percent; the other is an income-contingent repayment plan that caps the amount they repay in one year at 10 percent to 15 percent of their annual income.
The Senate is expected to vote on the agreement as early as next week.
There is no word from the House as to how it would proceed on such a bill.