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Tags: House | Votes | Student | Loan

House Votes to Avert Doubling of Student-Loan Interest Rates

Friday, 27 April 2012 02:56 PM EDT

The Republican-led House passed legislation to prevent the U.S. student-loan interest rate from doubling on July 1, defying President Barack Obama’s threat to veto the measure because it would raid a health-prevention fund to finance the subsidy.

The bill to extend the subsidy for one year passed on a 215-195 vote. The House vote sets up a confrontation with Obama and the Democratic-controlled Senate, where Majority Leader Harry Reid has proposed covering the cost of the $5.9 billion measure by raising taxes for some high earners.

The measure passed with the votes of 202 Republicans and 13 Democrats. Thirty Republicans and 165 Democrats voted against the legislation.

The Obama administration said the president’s advisers would recommend that he veto the House bill because it would eliminate a public-health fund to pay for the interest rate freeze. In a statement of administration policy, the White House called the proposal “politically motivated.”

Unless Congress acts by July 1, the interest rate students are charged for Stafford higher-education loans would rise from 3.4 percent to 6.8 percent. House Speaker John Boehner of Ohio rushed the bill to the floor this week as Obama completed a tour of college campuses in three swing states and pressed Congress to act.

‘Very Big Difference’

“President Obama took the issue to the people” and made it “too hot for the Republicans to handle,” House Democratic Leader Nancy Pelosi told reporters before the vote. The interest rate for college loans “makes a very big difference around the kitchen tables of America’s families,” Pelosi said.

Democrats accused Republicans of what Pelosi called “an assault on women’s health” by proposing to use money from the prevention and public health fund to finance the student loan- interest subsidy. The rest of the $11.9 billion in the fund would be used for deficit reduction.

The fund finances breast and cervical cancer screenings, child immunizations and prenatal tests for birth defects.

Boehner derided the program created by the 2010 health-care overhaul law as a “slush fund” that is immune from congressional oversight.

On the House floor before the vote, he said there is precedent for using the money, and that earlier this year Democrats supported taking $4 billion from the health-prevention fund to finance extension of the payroll-tax cut.

‘Absolutely Not True’

“To accuse us of wanting to gut women’s health is absolutely not true,” Boehner said in an infrequent floor speech. “Give me a break.”

Other House Republicans agreed. “What we are talking about is using a slush fund that is provided” to the health and human services secretary “to spend as she sees fit,” said John Kline, the Minnesota Republican who is chairman of the House Education and the Workforce Committee. “That is somehow perceived as an attack on women, what a surprise in this election year.”

The Obama administration’s policy statement called the Republican measure “a politically motivated proposal and not the serious response that the problem facing America’s college students deserves.”

In the Senate, Reid set up a procedural vote on a Democratic version of the measure for May 8, after Congress returns from a one-week recess. The House Republican plan “doesn’t sound like a good deal to me,” the Nevada Democrat said.

Senate Measure

The Senate plan would raise $9 billion by requiring law, accounting and other professional services firms with three or fewer shareholders to pay withholding tax if they make more than $250,000 annually. Partners in such firms now treat the income as profits and avoid the withholding tax.

Both bills would amend the 1965 Higher Education Act to adjust the rate for Federal Direct Stafford loans. The 3.4 percent interest rate has been in place since July 1, 2011, and is scheduled to revert to the higher rate on July 1.

Obama and Republican presidential candidate Mitt Romney are both courting the youth vote.

The former Massachusetts governor joined Obama in urging lawmakers to freeze the interest rates students pay for the government loans while blaming Obama for an economy in which “50 percent of recent college graduates are unemployed or underemployed.”

Younger Voters

A new Gallup Poll shows Obama must generate more enthusiasm among younger people to ensure they vote, though he leads Romney 64 percent to 29 percent among people ages 18 to 29. Only 56 percent of young registered voters said they will definitely vote in November, according to the poll conducted April 20-24. Romney leads Obama by 12 percentage points among voters age 65 and older, and 86 percent of this group said they planned to vote.

The anti-tax group Club for Growth had urged lawmakers to oppose the bill, saying it would count as a “yes” vote against lawmakers in its annual congressional scorecard.

“The federal government should not be in the business of distorting the market for student loans,” Club for Growth President Chris Chocola said in a statement. “Decades of government intervention have driven tuition costs to record highs and continuing these subsidies is simply bad policy.”

Opposition to Bill

Heritage Action for America, a political action group that supports smaller government, urged defeat of the student-loan measure, saying the vote would be among those used to rate lawmakers.

“Not only do the subsidies fail to stem the rising cost of a college education, the loans are also easily attained, increasing the likelihood taxpayers will be left on the hook when students default,” the group said in a statement.

Arizona Representative Jeff Flake, a Republican who is running for the U.S. Senate, said he opposes the bill because “paying for extensions with temporary subsidies from Obamacare funds is disingenuous.”

The House bill is H.R. 4628.

© Copyright 2023 Bloomberg News. All rights reserved.

Friday, 27 April 2012 02:56 PM
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