Instead, House Speaker John A. Boehner (R-Ohio) said the House would vote Friday on a proposal to keep interest rates at 3.4 percent for another year, financing it with an offsetting cut in a health prevention fud from President Obama’s health-care law. “What Washington shouldn’t be doing is exploiting the challenges that young Americans face for political gain. And it shouldn’t be sticking small businesses with a health care law that’s causing -- making it more difficult for them to hire workers,” Boehner told reporters.
This sets up a showdown with Democrats, who introduced legislation Wednesday to extend student loan rates at 3.4 percent for another year, rather than allowing them to jump to 6.8 percent July 1, a move timed to coincide with a tour of college campuses by President Obama highlighting the issue.
Senate Democrats will probably force a floor vote on the measure after Congress returns from a one-week recess next week.
The impending jump in college loan rates is quickly becoming a key campaign issue, with Democrats hoping it could rouse unenthusiastic young voters who helped propel Obama to victory four years ago. It could also appeal to their middle-class parents, concerned with the rising costs of college.
Aware of the potential potency of the issue, apparent Republican presidential nominee Mitt Romney said Monday that he too favors keeping the loan rate low for 7 million borrowers.
The messy details of how to pay the estimated $6 billion cost will be left to Congress, where a fight is brewing.
In a scathing floor speech Wednesday, Senate Minority Leader Mitch McConnell (R-Ky.) accused Obama and Democrats of playing deceptive politics with the issue and proposing a funding mechanism that Republicans will oppose so they can be painted as unsympathetic to the plight of college students.
“Look, if the president was more interested in solving this problem than in hearing the sound of his own voice or the applause of college students, all he’d have to do is pick up the phone and work it out with Congress,” McConnell said.
“Let’s be honest — the only reason Democrats have proposed this particular solution to the problem is to get Republicans to oppose it, to make us cast a vote they think will make us look bad to the voters they need to win the next election,” he said.
Sen. Lamar Alexander (R-Tenn.) has introduced a similar measure to the Boehner proposal on extending student loan rates with the offsetting cut to the health-care fund..
The Democrats say their proposal would close a loophole that allows some small businesses with three or fewer shareholders, classified as S corporations, to avoid payroll taxes. They say many businesses affected would be law firms and other professional services, and they would impose the taxes only on those making at least $250,000 a year.
On Tuesday, Sen. Tom Harkin (D-Iowa), chairman of the Senate Committee on Health, Education, Labor and Pensions, called the exemption a “glaring loophole” and said closing it would allow funding for the student loan provision and provide new dollars in future years for the social security trust fund, which is fed by payroll taxes.
“I know Romney says he’s now for keeping the interest rates down. Well, we’ll see if he’s for the pay-for. If not, how would he pay for it?” Harkin said.
Asked if Republicans would be likely to agree to the Democratic proposal for paying for the measure Tuesday, Sen. Majority Leader Harry M. Reid (D-Nev.) quipped: “The proper question is, is this something that Grover Norquist would accept — because he seems to be the marker for the Senate Republicans.”