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Student loan rates hang in balance as partisan warfare shifts to Senate

The Senate is the newest arena in the election year faceoff over federal student loans, and both sides are starting out by pounding away at each other.

With Congress returning from a weeklong spring recess, the Senate plans to vote Tuesday on whether to start debating a Democratic plan to keep college loan interest rates for 7.4 million students from doubling July 1. The $6 billion measure would be paid for by collecting more Social Security and Medicare payroll taxes from high-earning owners of some privately held corporations.

Republicans want a vote on their own bill, which like the Democrats' would freeze today's 3.4 percent interest rates on subsidized Stafford loans for one more year. It would be financed by eliminating a preventive health care program established by President Obama's 2010 overhaul law.

Each side scoffs that the other's proposal is unacceptable, and neither is expected to garner the votes needed to prevail. Even so, everyone expects a bipartisan deal before July 1 because no one wants students' interest rates to balloon before November's presidential and congressional elections.

"We're still pushing on that," said Rhode Island Sen. Jack Reed, chief sponsor of the Democratic bill. "But I also think I recognize if there is another proposal outside of going after the health care fund, we'll certainly listen."

Stafford loans are provided for low- and middle-income students. With student loans of all types a growing household burden that now exceeds the nation's credit card debt, the fight in Congress has come to symbolize how each party would help families cope with the rugged economy and how to pay for it.

Each party has used the student loan fight to vilify the other to voters, as Obama illustrated Friday in remarks to a cheering crowd at a high school in Arlington, Va.

"We shouldn't have to choose between women having preventive health care and young people keeping their student loan rates low," he said, continuing a Democratic theme that the GOP doesn't care about women's issues.

Republicans were giving as well as they got.

In a statement, Senate Minority Leader Mitch McConnell, R-Ky., said the student loan issue was a phony fight designed by Democrats as a distraction for young people who "can't find good jobs in the Obama economy." Others also called it a charade.

"It seems like once a week, they begin the week by turning the Senate into a political playpen for the presidential race," Sen. Lamar Alexander, R-Tenn., sponsor of the GOP student loan measure, said in an interview.

If the loan rates rise to 6.8 percent July 1, it would affect more than 7.4 million students expected to seek subsidized Stafford loans in the year running through June 2013. The Department of Education projects that those students would borrow $31.6 billion, averaging $4,226 apiece.

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