[1] President Obama was on the campaign trail this week, speaking to students at the University of North Carolina, the University of Colorado and the University of Iowa. He also appeared on NBC’s “Late Night with Jimmy Fallon” to appeal to the youth demographic by promoting his plan to stop the scheduled doubling of the interest rate on student loans. But Kentucky’s Senator Mitch McConnell believes the president is just playing “political games.”
Government-subsidized Stafford loan interest rates are scheduled to increase from 3.4% to 6.8% in July; an increase that would affect 7.4 million students. The White House estimates [3] that the increase will require students with average student loan indebtedness to pay an additional $1,000 in interest, over the term of their loans.
Both Democrats and Republicans appear to agree that steps should be taken to limit the scheduled increase in student loan interest rates. Senate Democrats and the White House are seeking a one-year freeze in the interest rate. The $6 billion cost would be offset by limiting a tax provision that allows some owners of so-called S-corporations to avoid paying Medicare payroll taxes on their earnings.
According to Bloomberg Financial [4], millions of small, family owned-businesses around the country are classified as S-corporations, and would be caught up in this tax net for no reason other than that they are small, and successful. And this new, permanent tax on small businesses—$9 billion over 10 years according to the CBO—to fund the cost of just one year of the interest rate freeze ($6 billion), will merely be another example of the Democrats “kicking the can down the road.” A year from now, after the presidential election, the student loan interest problem will surface again.
The Republicans, on the other hand, are pushing a bill that would pay for the 3.4% student loan interest rate reduction by diverting Obmacare revenues from funds set aside for “prevention and public health fund for immunization campaigns, research, screenings and wellness education.” This fund was created by President Obama's health care overhaul law, and Republicans have dubbed it a "slush fund." Earlier this year, they succeeded in using some of the fund to help pay for maintaining doctors' Medicare reimbursements.
The Republican proposal is scheduled for a vote in the House of Representatives tomorrow, and Minority Leader Nancy Pelosi, (Dem., Calif.) told reporters she and other Democrats will oppose it. Pelosi said Republicans have decided, "'Let's take it out of our old favorite target, women's health,' and that's just wrong."
Kentucky’s senior senator, U.S. Senate Republican Leader Mitch McConnell, took to the floor in the Senate Wednesday, and talked about the tough job market college graduates are facing in the Obama economy, and the scheduled jump in student loan interest rates.
“One of the most heartbreaking yet underreported consequences of the Obama economy is the extent to which college graduates today are stepping out into a world where the possibilities no longer seem endless,” said McConnell. “Unlike generations past, today’s college graduates are more likely to end up either unemployed or back at home with mom and dad, saddled with student loan debt, than they are to end up with the job of their dreams.
McConnell criticized the president for going around the country telling students that unless Congress acts, their interest rates will go up in July. “What he won’t tell them is that he cared so little about the legislation that created this problem five years ago that he didn’t even show up for the vote,” McConnell said. “And that once he became President, he didn’t even bother to include a fix for it in his own budget.”
According to Senator McConnell, both sides are in agreement that the student loan interest rates need to be kept at 3.4%. “The only question is how to pay for it,” he suggested. “Democrats want to pay for it by raiding Social Security and Medicare, and by making it even harder for small businesses to hire. We happen to think that at a time when millions of Americans — and countless college students — can’t even find a decent job, it makes no sense whatsoever to punish the very businesses we’re counting on to hire them. It’s counterproductive, and it’s wrong,” he continued.
“And let’s be honest,” said McConnell. “The only reason Democrats have proposed this particular solution to the problem is to get Republicans to oppose it, to make us cast a vote they think will make us look bad to the voters they need to win the next election… let’s end the political games and solve this problem like adults.”
The senator concluded by suggesting that this could be an easy problem to fix. “The only real challenge in this debate is coaxing the President off of the campaign trail and up to the negotiating table, to get him to choose results over rallies,” he said.
President Obama on Student Loan Interest Rates: "I know about this firsthand"
House Will Vote to Extend Student Loan Rates, Cut ObamaCare Slush Fund
Learn more: White House, “Don’t Double My Rates [3]” campaign
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