The national student debt clock ticked past $1 trillion today—a fitting backdrop for a vote in the US Senate about whether to allow federal subsidized loan rates to double on July 1. Alas, Senate Republicans refused to allow debate on a bill that would keep loan rates at the current 3.4 percent, and pay for the subsidization by eliminating a sneaky tax break for wealthy Americans.
The “Stop the Student Loan Interest Rate Hike Act of 2012,” sponsored by Senate Majority Leader Harry Reid, would lock in the current rates with revenue from increased Medicare and Social Security taxes on firms with three or fewer shareholders—known as “S Corporations.” Some wealthy Americans—like say John Edwards and Newt Gingrich—create S-Corps in order to treat only a small portion of their total earnings as taxable wages, thus avoiding the Medicare and Social Security taxes.
Every Democrat in the Senate, along with independent Senators Bernie Sanders and Joe Lieberman, voted for the bill—but every Republican except three voted against it, thus keeping it from reaching the sixty-vote threshold for debate. Senator Mark Kirk, who is recovering from a stroke, did not vote, nor did Senator Richard Lugar, who is campaigning for his political life in Indiana today. Senator Olympia Snowe, who is retiring this year because she believes there’s too much partisanship, stood proudly against party politics by simply voting “present.”
The messaging by Democrats here is obvious: Republicans are hurting students and protecting the wealthy. Said Reid after the vote:
Today, Republicans voted to hit students with an additional $1,000 in debt in order to protect wealthy tax dodgers. Republicans have paid lip service to the need to protect our students from this crushing debt burden, but their obstruction speaks louder than their words. […]
Unfortunately, it appears that Republicans appear more interested in obstruction than progress. For the sake of the seven million students who are at risk of seeing their payments skyrocket, I hope Republicans’ actions will start to align more closely with their words.
Republicans profess to want to keep the student interest rates low, too, and Republicans in the House passed a bill in late April that would preserve the current rates by eliminating what they derisively call the “Obamacare slush fund,” but can more accurately be described as a preventative and public health care fund, created under health care reform, that provides $12 billion for things like medical research, diabetes prevention, modernized immunizations, tobacco cessation efforts and similar initiatives.
It’s important to note there are strong forces on the right that don’t want the rates to stay low at all—the powerful Club for Growth doesn’t think there should be any federal subsidization of student loans and that rates should instead be set by the market. Thirty Republicans in the House voted against the rate extension/slush-fund bill because of dedication to that same principle.
But the consensus in DC is that the low loan rates will be preserved, somehow. It’s simply too dangerous not to, especially in an election year. Democrats and Republicans have now offered bills to extend the rates with pay-fors they find electorally valuable—closing tax loopholes for the wealthy and rolling back part of Obamacare, respectively—but will likely find some kind of arrangement before the loan bomb detonates.
The question, really, is what else can Congress do to help indebted students? Student loan debt has already surpassed credit card debt in America and hangs over million of young people. It’s certainly noble and worthwhile to stop the subsidized loan rates from jumping, but most students also have loans beyond this category—both federal unsubsidized loans and private ones. The structural problems that create soaring tuition rates in the first place also need to be addressed.