(AP) -- Student loan rates will double Monday — at least for a while — after a compromise to keep student loan interest rates low proved unwinnable before the July 1 deadline, senators said Thursday.
Sen. Tom Harkin, the chairman of the Senate education panel, said none of the proposals being circulating among lawmakers could win passage, and he urged lawmakers to extend the current rates for another year when they return from the July 4 recess. Harkin said his colleagues could retroactively restore the current rates after the holiday.
"Let's put this off for a year," Harkin, D-Iowa, told reporters.
Interest rates on new subsidized Stafford loans are set to go from 3.4 percent to 6.8 percent on Monday unless lawmakers take action. Congress' Joint Economic Committee estimates the increase will cost the average student $2,600.
"Neither party wants to see rates rise next week," said Sen. Richard Burr, R-N.C.
But a one-year rate extension isn't an acceptable option, either, he said.
"Last year we kicked the can down the road and passed a one-year extension for only a small group of students. ... Why would we make the same mistake again and just kick the can down the road another year?" said Burr, who was among a group of senators who worked on a competing proposal with Sen. Joe Manchin, D-W.Va.
The Manchin-led proposal would link interest rates to the financial markets. It borrowed heavily from a version House Republicans passed earlier and from principles included in President Barack Obama's budget proposal.
Critics called it a bait-and-switch move that would provide students lower interest rates at first before they climb upward as the economy improves.
"Students across this country would rather have no deal than a bad deal," said Sen. Jack Reed, D-R.I. "We're at the point where we have to do our best to extend the 3.4 percent interest rate while we work on a good deal, not just any deal."
Republicans blamed Democrats and said they would be responsible for the expected rate hike.
"As a result of their obstruction, the Democrat-led Senate will leave town and allow interest rates on some new student loans to increase on Monday," said Senate Republican Leader Mitch McConnell. "Senate Democrats continue to block reform and insist on kicking the can down the road."
Republicans also noted the Manchin-led proposal had many similarities with Obama's, including a link between 10-year Treasury notes and student rates.
"This agreement is very much like the proposal in the president's budget, it is very much like the proposal passed by the Republican House of Representatives and it will save billions of dollars in interest for all 11 million students taking out loans this year by dropping rates on all student loans," said Tennessee Sen. Lamar Alexander, the top Republican on the Senate Health, Education, Labor and Pensions Committee.
Alexander, a former education secretary, called Harkin's proposal "a short-term, political fix."
"That's no fix at all when we have a plan to help all students that we can pass quickly," he added.
Nothing was happening — quickly or not — before July 1, meaning students who take loans would face higher rates. Senators were heading out of town without a deal, and Harkin said his colleagues would consider a retroactive fix on July 10.
"I think we are nowhere between now and July 1," said Rep. George Miller of California, the top Democrat on the House Education and the Workforce Committee. "It sounds to me like the Senate is going to leave town without dealing with this."
But Democrats promised to turn back to them when they get back to Washington, first with a short-term fix and then a longer-range measure.
The law that governs college and universities expires this fall and lawmakers planned to rewrite it starting in September. Democrats said they prefer to include a comprehensive student loan measure in it, rather than as a stand-alone bill.
"We need a one-year patch to keep interest rates from doubling on student loans," said Sen. Elizabeth Warren, D-Mass. "That buys us the time."