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Tuesday, May 8, 2012

7.4 million College Students Affected

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.


1 comment:

  1. Koch Qaeda Senators Filibusters Student Loans For "Inside Job" Koch Qaeda Amer-ick'-an Bangkster "Mob."
    Common Motto: "Corruption is R- Business Model"
    IN-Indiana, CO-Colorado, & SC- South Carolina have Exempted Koch Qaeda A.L.E.C. from disclosing "Lobbyist" Spending from the States "Disclosure" Laws.