GOP-led House votes to keep rate low on student loans, as Obama balks

The White House says Obama will veto the House bill on student loans. It prefers a Senate measure that also helps debt-crushed students, but that covers the cost by closing a tax loophole benefiting the wealthy. 

Charles Dharapak/AP
House Speaker John Boehner of Ohio, accompanied by House Education and the Workforce Committee Chairman Rep. John Kline, R-Minn., left, and Rep. Jeb Hensarling, R-Texas, speak about a student loans bill, Wednesday on Capitol Hill.

Keeping interest rates on federal student loans from doubling as of this summer turned out to be more controversial than expected, as the GOP-led House of Representatives narrowly approved a measure Friday to extend the lower rate for another year.

All but 13 Democrats voted against the measure, mainly because they don't like how House Republicans came up with the money to pay for it. But 30 Republicans also put up "nay" votes, breaking with their leadership. In the end, the bill was approved 215 to 195. It holds interest rates on new federally subsidized Stafford loans at 3.4 percent come July 1, when they would otherwise rise to 6.8 percent.

“Every penny counts when you’re trying to start a career in a job market where even the most experienced workers can’t find a job,” said Rep. Judy Biggert (R) of Illinois, the bill’s sponsor, in a statement. “And the tax-and-spend policies in Washington haven’t made it any easier. The last thing these students need is more debt, and my bill will prevent an unfair rate hike at the worst possible time.”

A student loan bill has not yet come before the Senate, where Republicans have proposed a measure similar to that in the House. But Democrats control the Senate, and their proposal uses a different mechanism to pay for the low loan rate. They would eliminate a tax loophole that allows some individuals providing lucrative consulting or legal services to avoid payroll taxes. The Senate is slated to vote on the Democratic option during the second week of May.

The House student-loan legislation, on the other hand, picks up the $6 billion tab by raiding a part of President Obama’s health-care law that provides preventive and public health services. That stuck in many Democrats' craw. It also created a dilemma for them: Vote against the low interest rate for student loans, or swallow the funding mechanism.

Just hours before the vote, the White House rode to their rescue, promising that President Obama would veto the House version because of the funding source.

“This is one of the most cynical in a long string of cynical choices the Republicans have artificially put before us,” says Rep. Gerald Connolly (D) of Virginia. “That’s odious.... From the Democratic point of view, it’s a false choice and we’re not going to fall for that.”

But the bill likewise ran afoul of some of the House’s most conservative members, especially after two key conservative groups – Heritage Action and the Club for Growth – urged lawmakers to vote against it for different reasons.

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

Heritage Action, for its part, urged a “no” vote because the bill approached the president’s health-reform law in the wrong way.

“The proper approach to Obamacare is to repeal the entire law,” the group wrote in its alert to lawmakers. “Congress should not use Obamacare as a ‘slush fund’ to pay for temporary extensions.”

Still, Republican leaders saw the student loan vote as a way to turn the tables on Mr. Obama and Democrats, who had put the spotlight on the issue during the past week. Obama traveled to the three battleground states of North Carolina, Colorado, and Iowa, delivering campaign-style speeches that urged Congress to keep the lower loan rate. His Republican challenger, Mitt Romney, soon signaled his approval for extending the low interest rate, which caught some House Republicans, who had initially criticized the proposal, short.

Friday's vote, however, put Republicans on the “aye” side of keeping rates low on student loans, and it put most Democrats on the "nay" side.

“It’s a simple as this: Republicans are acting to help college students, and the president is now getting in the way,” said Michael Steel, spokesman for House Speaker John Boehner.

Both sides argue that their opponent is engaged in some form of hypocrisy. Republicans say Democrats have already offered up the health-care fund as a way to pay for other priorities, such as the payroll tax cut.
 Democrats, for their part, insist that Republicans already refused to extend low student loan rates when they voted en masse on March 29 for the budget written by Rep. Paul Ryan (R) of Wisconsin. That budget plan assumed that student loan rates would rise in July. “Make no mistake ... our Republican colleagues haven’t changed their minds about this,” said Rep. Chris Van Hollen (D) of Maryland, the Budget Committee’s ranking Democrat, on the House Floor Friday. “They have changed their tactics.”

In the end, the bill knitted together enough Republicans with a melange of Democrats, many of whom voted against Obama’s health-care reform bill, to get it across the goal line. But some lawmakers are losing patience with Congress's recent penchant for adopting only short-term fixes – Congress will have to decide how to handle higher student loan rates again next year.

“We’ve got to get away from band-aid approaches,” said Rep. Allen West (R) of Florida, before Friday's vote. “We’re taking a Kleenex and wiping the nose, we’re not treating the flu.”

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