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Senate Drops Student Loan Rate Deal As Deadline Nears

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Seven million college students will be socked with more loan debt come Monday, when interest rates on government-backed student loans are set to double, as the Senate could not reach a compromise ahead of Monday's deadline. Washington bureau reporter Geoff Bennett filed the following report for NY1.

Call it another manufactured crisis in the nation's capital.

Republicans, Democrats and the Obama administration could not agree on a plan to keep the interest rates on federal Stafford loans from doubling. That means rates will jump from 3.4 percent to 6.8 percent.

Democrats say they want to keep interest rates on Stafford loans low to help middle-class families. Republicans, in cost-cutting mode, want to link rates to the financial markets and allow them to float up to a cap of 8.5 percent.

One thing a lot of lawmakers agree on is that affordable student loans shouldn't be a political football.

"It is so embarrassing," said Rep. Charles Rangel. "But sooner or later, people are going to wake up. We just can't afford to do this to our students, and we can't afford to do it to our economy."

On Thursday, in a last-ditch effort, two different groups of senators introduced plans that would prevent an increase on those student loan rates.

"Our young people cannot afford even more debt," said Sen. Kay Hagan of North Carolina. "Do you realize today that Americans have more student loan debt than credit card debt? We cannot put our young people even farther behind."

But the Senate adjourned Thursday evening for its July 4 recess without striking a deal.

An agreement is still possible after the break, and it would likely include retroactive legislation stopping the July 1 increase.

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