Deadline Near With No Deal on Loan Rates for Students

WASHINGTON — with solely 5 days before interest rates on student loans are scheduled to double, the senate majority leader rejected a proposed bipartisan answer having now scrambled alliances and muddied political attacks for each side.

Barring a last-minute breakthrough, 7.4 million university students will see rates on their federal Stafford loans jump to 6.8 percent from 3.4 percent on July 1.

“I hope that people start looking at truly compromising and working on something that fixes it,” said Senator Joe Manchin III of West Virginia, whose conciliatory proposal was shot down Wednesday by fellow Democrats, including Majority Leader Harry Reid. “You’ve got rates going up to 6.8 percent. That’s unfathomable, and it doesn’t have to happen.”

For weeks, Congressional Democrats have been anticipating that the standoff over student loan interest rates would be a political boon. In college student newspaper advertisements, on social media platforms and in town hall meetings, Democratic lawmakers cast themselves as the saviors of low, subsidized lending rates, battling Republicans intent on subjecting college loans to the whims of the financial markets. They banked on Republicans caving and extending the fixed, 3.4 percent rate for at least a year, just as they did a year ago when a similar deadline loomed.

But instead House Republicans passed their own student loan bill in May, then went on the offense, saying the Democrats were the ones who have failed to act responsibly. President Obama complicated the politics with his own student loan proposal, which was somewhat similar to the Republican plan. The issue was buried beneath bigger news events: an immigration battle in the Senate, scandals swirling in the House, government eavesdropping revelations and a flurry of significant Supreme Court decisions.

Then with the deadline looming, Mr. Obama abandoned the bully pulpit and headed to Africa.

All that has left Democrats divided and Republicans crowing.

“We could and should get this done for the students of our country,” Representative Eric Cantor of Virginia, the House majority leader, said Wednesday.

A glimmer of hope peeked through Washington’s cloudy skies Wednesday when five senators — three Republicans; one independent who leans Democratic, Angus King of Maine; and Mr. Manchin — unveiled what they billed as a breakthrough.

The proposal would fix all new student loans to the 10-year U.S. Treasury bond rate, plus 1.85 percentage points. Graduate student loans would be 3.4 percentage points above the 10-year rate.

But a conservative Democrat and a Maine independent proved to have no sway with most Democrats, who protested that the proposal lacked a hard cap on interest rates to protect against market fluctuations. They also objected to interest rates that would earn the government $1 billion over 10 years. A spokesman for Mr. Reid quickly shot down rumors that a deal was at hand.

“There’s not been a willingness by our Republican colleagues yet to focus on a real cap,” said Senator Debbie Stabenow, Democrat of Michigan and one of the negotiators trying to reach a deal. “And over time what we’ve seen in the proposals actually goes higher than doubling the rates.”

Senators Tom Harkin of Iowa and Jack Reed of Rhode Island, both Democrats, will rush new legislation to the Senate on Thursday to freeze the 3.4-percent rate for one year while lawmakers try to reach a long-term agreement in a broader higher education law. But even the bill’s authors acknowledge it almost certainly will not be able to get a vote before Congress leaves for a weeklong July Fourth break.

Instead, the legislation would make the fixed rate retroactive to July 1. Since most university students do not sign loan documents until early August, “we have a little wiggle room, but not a lot,” said a Senate Democratic aide involved in the drafting.

Democratic leaders, once convinced they could win a clear victory over Republicans, were reduced Wednesday to arguing that allowing interest rates to double would be better than fixing loans to fluctuating market rates.

“I don’t know,” Senator Richard J. Durbin of Illinois, the No. 2 Democrat, said with a shrug. “Student groups said: ‘Let it double. We’d rather see it double to 6.8 than the alternatives we’ve heard.’ ”