The student loan
filibuster may be the highest-profile stalemate yet. The
vote was the Senate Republicans’ 21st successful filibuster of a Democratic bill this Congress,
which started in January 2011. Republicans
have blocked consideration of President Obama’s full jobs proposal, as well as
legislation repealing tax breaks for oil companies, helping local governments
pay teachers and first responders, and setting a minimum tax rate for
households earning more than $1 million a year. Republicans say the measures
were flawed and potentially harmful to the economic recovery. Unlike those earlier bills, this one is not likely
to be abandoned. More than 7 million
undergraduates taking out federally subsidized loans to cover next year's
tuition will have to dig deeper in their pockets to pay them off.
The interest rate was
lowered to 3.4 percent under an agreement in a Democratic-controlled Congress
five years ago but that legislation is expiring. In 2007, lawmakers temporarily cut the rate
for undergraduates taking out those loans up to the 2011 school year. The lower
rates were phased in, so students have really only enjoyed the lowest 3.4% rate
on subsidized federal loans for one school year. The 2007 law allowed interest
rates to revert back to 6.8% for the 2012-2013 school year starting July 1.
Graduate students with Stafford loans pay a
higher rate, as do students with unsubsidized Stafford loans. Most
undergraduates take out both unsubsidized and subsidized loans. With subsidized student loans, the federal government absorbs some
of the interest rate for lower- and middle-income families based on financial
need. One student financial loan expert,
Jason Delisle of the left-leaning New America Foundation, points out that there
are programs already in existence that ease the repayment burden for
unemployed and under employed graduates. He thinks the federal government can
help more students in other ways -- such as maintaining funds for Pell Grants
going to lower-income students. Delisle
points out that even the 6.8% interest rate is also a subsidized rate that's
lower than what students will find on the private market.
Mr. Obama has elevated the issue by hammering
Republicans on it for weeks. American students took out twice the value of
student loans in 2011, about $112
billion, as they did a decade before, after adjusting for inflation. Over all,
Americans now owe about $1 trillion in student loans. In 2010, such debt
surpassed credit card debt for the first time.
Students are paying close attention to
the issue. Young
people 18-29 supported the Democratic plan by a 2-1 margin. With unemployment just below 24% for
teenagers and 14% for those ages 20 to 24, more young people are going back to
school or staying in school, according to recent data by Equifax.
Additionally, more students struggle to pay
back these loans. Student loan delinquencies with payments more than three
months late rose 14.6% in 2011 from the year before, according to Equifax.
Many lawmakers in both parties agree they'd like to extend the current
3.4% rates for another year. What they don't agree on is how to offset the $6
billion it would cost to do so -- a substantial hurdle. “We all agree we’re not going to let the rate
go up,” Mr. McConnell said. Republicans
made clear they would go on offense, blaming Democrats if interest rates
doubled July 1.
The GOP-run House last
month passed its version of an interest fix that would keep rates from
jumping to 6.8 percent. But that bill's means to finance the $6
billion annual subsidy — stripping preventive health-care
services from the new health insurance law — is highly objectionable to
Democrats. President Obama vowed
to veto that bill.
Republicans would not accept the Senate Democrats’ proposal to pay
for a one-year extension by changing a law that allows some wealthy taxpayers
to avoid paying Social Security and
Medicare taxes by classifying
their pay as dividends, not cash income.
“They want to raise taxes on people who are creating jobs when we are
still recovering from the greatest recession since the Great Depression,” said Senator
Lamar Alexander, Republican of Tennessee.
Blunt and
Republicans distributed a letter in opposition to the Democratic plan signed by
a long list of business associations, among them the U.S. Chamber of
Commerce, the American Bankers Association, and Associated
General Contractors of America. The
letter asserted that the Democratic plan would sock a variety of closely
held businesses, from real estate to consulting. Active shareholders of 'S'
corporations would be required to pay payroll taxes on both wages and earnings,
a "provision that could be expanded to include other, more capital
intensive industries," the letter read.
In 2004, when it emerged that John Edwards, then a vice-presidential
hopeful, had classified himself as a “subchapter S corporation” to pay himself
dividends rather than income, conservatives
criticized him for avoiding payroll taxes.
Women heavily support
the Democratic plan.
Missouri Sen. Claire
McCaskill, offering reasons why she voted with her
Democratic colleagues, said: "If we’re going to keep this economic
recovery moving in the right direction, then we’ve got to make college more
affordable and accessible and make sure our kids and grandkids can compete for
the jobs of the future. That’s what this fight is all about.” Senator Claire McCaskill (D-Missouri) says the federal government
has an obligation to stay involved in guaranteeing student loan programs. She says privatizing large amounts of student
loans would keep a large number of kids from going to college. "The notion that this can be done in the
private sector flies in the face of the reality of what kind of credit risk
kids right out of high school are whose families don't have the economic
wherewithal to send them to school."
Sen. Roy Blunt, R-Mo., sounded a political note
in explaining his 'no' vote. He says the
Democrats cut local banks out of the student loan equation and now they're
stuck with having to double interest rates to make the programs work. "You know, we should get back to where
there's a competitive marketplace out there where people are loaning money to
students, and they're loaning it at some rate that is close to the regular
interest rate rather than a rate set by the government years in advance."
“College students and
recent college graduates face fewer job opportunities and less income in the
Obama economy," Blunt said in a statement. "Instead of compounding
the problem with more bad policies that raise taxes on small businesses and raid
Social Security and Medicare, we must work together to prevent a rate increase
on students and make it easier for job creators to hire them when they
graduate.”
Instead of asking large,
private corporations to pay their fair share, Republicans want to eliminate the
funding for a preventive health care program. You read that right.
Republicans think that asking corporations to pay their fair share is too much
to ask, but eliminating funding for preventive health care programs is totally acceptable.
Source: