WASHINGTON — Borrowing for tuition, housing and books would be less expensive for college students and their parents this fall but the costs would start climbing almost immediately under a deal the Senate was poised to pass Wednesday.
The bipartisan proposal lawmakers were considering would link interest rates on federal student loans to the financial markets, providing lower interest rates right away but higher ones if the economy improves as expected. Senate aides said lawmakers were on track to finish work by late Wednesday afternoon.
Liberal Democrats labeled the White House-backed proposal a bait-and-switch measure that would lure in new borrowers with low rates now but would cost future students.
"The bill before us today offers students and families lower student loan interest rates in the near-term but we can fully expect higher student loan interest rates in the years to come," said Sen. Tammy Baldwin, D-Wis. "Why on earth would we want to expose our students to higher rates?"
The White House and its allies said the new loan structure would offer lower rates to 11 million borrowers right away and save the average undergraduate $1,500 in interest charges. Democratic leaders expected widespread defections from within their ranks but expected Republican support would help them win passage.
But there was no denying the new structure could cost future students if the economy improves as expected and interest rates climb. The White House's allies instead suggested the new formula is better than the status quo.
"At the end of the day, we have a very clear choice to make: stick with the 6.8 percent interest rate or lower it," said Sen. Dick Durbin, the Illinois Democrat who oversaw the negotiations.
Durbin said senators' concerns could be part of talks this fall on the Higher Education Act. But for students right now, he said, students needed the compromise to pass to dodge higher costs.