Student loans: GOP filibuster blocks Senate move to freeze low rates
Student loans will cost more come July 1 unless Congress acts. While both parties say they support extending low rates on federally subsidized loans, election-year politics have intervened.
Senate Republicans successfully filibustered a Democratic proposal to extend low rates on student loans Tuesday. While both parties say they want the legislation passed, it has fallen prey to polarized election-year politics.Skip to next paragraph
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As with seemingly every issue in Congress, the question remains how the two parties aim to pay for the measure’s estimated $6 billion cost over the next year. Without a fix, the interest rates on federally subsidized student loans would double from 3.4 percent to 6.8 percent come July 1.
Republicans largely held together in a party-line, 52-to-45 vote that fell short of the 60 votes needed to move the bill to full consideration. Sen. Olympia Snowe (R) of Maine voted “present” while Senate majority leader Harry Reid voted against the measure for procedural reasons.
“For the life of me I don’t understand why the Republicans don’t even want to go to the bill,” said Sen. Tom Harkin (D) of Iowa, one of the measure’s sponsors, before the vote. “Perhaps they’re afraid if the vote comes down to the bill itself and the ‘offset,’ maybe my friends on the other side of the aisle would think that students are more important than the wealthy in this country.”
The devil, of course, is in the “offset.” Senate Democrats proposed what they call the “Newt Gingrich/John Edwards rule,” that would prevent wealthy individuals from shielding some of their income from payroll taxes by incorporating themselves as S corporations. The rule was so named because Mr. Gingrich and Mr. Edwards both used this financial device.
Democrats say that in Edwards’s case, according to financial records released during the 2004 campaign, such incorporation allowed him to pay himself a $360,000 salary (subject to payroll taxes) but take profit distributions of $26.9 million (not subject to payroll taxes) for his work as a trial lawyer. In doing so, he allegedly avoided some $600,000 in taxes that fund Medicare and Social Security, among other programs.
Republicans, on the other hand, see this approach as not only raising taxes, an absolute dead letter among their caucus, but as short-circuiting a needed student loan extension by connecting it to payroll taxes that should go elsewhere.
“The bill we will vote on taxes small businesses and raids funds that would otherwise go to shore up the Social Security and Medicare trust funds,” said Sen. Mike Johanns (R) of Nebraska on the Senate floor. “Providing relief for students, protecting seniors benefits, and fueling our nation’s jobs engine should not be mutually exclusive goals.”