Senate Republicans Block Vote on Bill to Freeze Interest Rate on Student Loans

May 08, 2012

Republicans in the U.S. Senate blocked a bill on Tuesday that would temporarily freeze the interest rate on subsidized student loans, saying the measure would prolong the nation's economic slump.

A motion to end debate on the bill, which would raise taxes on certain businesses to pay for a one-year extension of the current rate, garnered 52 votes, eight shy of the number required to end a Republican filibuster and proceed to a vote.

Without action by Congress, interest rates on subsidized Stafford loans to undergraduates are set to double, to 6.8 percent, on July 1, just four months before the presidential election. Both political parties want to avert an increase that could alienate student voters, but they differ sharply on how to pay for it. Postponing the increase for a year is expected to cost $6-billion.

In late April, Republicans in the House of Representatives passed a bill that would pay for the lower interest rate by tapping into a fund for preventive health care that was created as part of President Obama's health-care overhaul. Democrats decried the plan as an assault on women's health, and suggested cutting subsidies to oil companies instead. Each side accused the other of political pandering, and President Obama threatened to veto the bill.

The grandstanding continued this week, when the Senate took up a Democratic bill that would pay for the interest-rate freeze by tightening taxes on owners of so-called S corporations, a plan backed by the White House. On Monday, Sen. Michael B. Enzi of Wyoming, the top Republican on the Senate education committee, accused Democrats of playing "election-year politics" at the expense of students.

"Democrats prefer to pick a fight rather than help students during these tough economic times," he said. "They would use an irresponsible tax increase on small businesses when we need these employers to create jobs so college students have employment opportunities when they graduate."

Sen. Tom Harkin, a Democrat of Iowa and the education committee's chairman, responded by accusing Republicans of "going to the mat to prevent wealthy taxpayers from having to pay their fair share."

"We need to be putting the middle class first, to be putting students struggling to pay for college first," he said. Republicans, he charged, were "using this issue as another opportunity for political point-scoring."

Recent polls suggest that a majority of Americans prefer the Senate Democrats' approach over the House Republicans'. In a poll conducted by United Technologies/National Journal this month, half of the respondents said they favored raising taxes on some businesses to pay for the freeze, while only 34 percent would draw the money from the health-care fund. The Democratic plan was even more popular among women and young voters, two core Democratic constituencies.

Behind the scenes, meanwhile, a compromise may be starting to take shape. On Monday aides in both parties told the Associated Press they were confident that an agreement would be reached by the July 1 deadline.

For now, though, both parties appear content to use the fight to score political points.