(CBS News) The Senate on Wednesday failed to advance debate on a bill to return to lower interest rates on federal student loans for another year -- effectively failing on a bill that simply kicked the can down the road for a year.
Last week, interest rates on federal student loans doubled from 3.4 percent to 6.8 percent. Both Democrats and Republicans say they are in favor of lower rates, but they disagree over whether or not to tie the interest rate to financial markets.
The measure taken up Wednesday would have returned rates on newly-issued loans back to 3.4 percent for another year. The Senate needed 60 votes to proceed with the bill, but it only received 51 votes.
Senate Majority Leader Harry Reid, D-Nev., said Wednesday that a number of senators from both parties met that morning to try to hash out a compromise.
If the rate isn't fixed, it will impact the seven million people who will take out a loan this year. According to CBS News analyst Mellody Hobson, a higher rate could have a noticeable impact on the economy. Debt takes a toll in various ways; for instance, someone with student loan debt is 36 percent less likely to own a home.
A bill passed in the Republican-led House would peg rates to the U.S. Treasury borrowing cost, plus 2.5 percent. The nonpartisan Congressional Budget Office projects could save the government $3.7 billion over 10 years. Congressional Democrats, however, object to filling government coffers with money from students, pointing out that students would likely pay higher and higher rates under the GOP plan.
Ahead of Wednesday's vote, Senate Minority Leader Mitch McConnell, R-Ky., slammed the Senate for its failure to move any plan forward.
"To an outside observer, this should have been an easy, bipartisan slam dunk," he said on the Senate floor. "The proposals put forward by President Obama and congressional Republicans have been striking similar. Yet here we are after the July 4th deadline and Senate Democrats are still blocking bipartisan student loan reform."
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