Congress Likely to Miss Student Loan Deadline

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The Senate is unlikely to strike a deal to prevent student loan rates from rising on July 1.

On Thursday, two groups of senators—one a bipartisan group that includes Sens. Joe Manchin (D-WV) and Tom Coburn (R-OK), the other of just Democrats—planned to release proposals to prevent rates from doubling from 3.4 percent to 6.8 percent while Congress is taking a vacation for the July 4 holiday.

A group of Democrats—Sens. Jack Reed (D-RI), Kay Hagan (D-NC), Tom Harkin (D-IA), Al Franken (D-MN), Elizabeth Warren (D-MA), and Debbie Stabenow (D-MI)—planned a press conference for Thursday afternoon to announce a plan for another one-year extension of current rates.

But neither is likely to come up for a vote on the floor before senators depart for that holiday.

(Read More: Boehner on Loans: Obama, Do it My Way)

Asked why it's taken until June 27 to come up with a proposal to fix a problem that crystallizes on July 1, Sen. Angus King (I-ME) quipped, "It's like Dr. Johnson's comment about the dog that could walk on its hind legs. The remarkable thing is not that it's done well, it's that it's done at all."

Most in Congress agree the loan rates should to stay lower than 6.8 percent, at least for the subsidized Stafford loans used by the country's lowest-income students. But they're stuck on how to get there.

Republicans want to let the rates fluctuate with the markets every year and use the proceeds for deficit reduction. Democrats say that's unreasonable and want to cap how fast rates can rise.

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The Thursday proposal from Sens. Lamar Alexander (R-TN), Richard Burr (R-NC), King, Manchin and Coburn would lower the rates and then link them to the interest rates for Treasury bonds. As interest rates rose on Treasury bonds, so too would new loan rates.

They claim their proposal is similar to the one President Barack Obama has been pushing. Earlier this week, White House Press Secretary Jay Carney said that the administration is willing to adjust its proposal to accommodate what Senate Democratic leaders want, including adding a cap on rates.

Either way, their proposal isn't going to see the light of day this week. Neither will the competing Democratic proposal.

Either one, if enacted later in July, would be retroactive—so any loans approved after July 1, but before legislation passes, would have the lower interest rates.

—By Kasie Hunt and Abigail Williams, NBC News.