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Congress Approaches a Deal to Keep Student Loan Interest Rates Low | The Nation

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George Zornick

George Zornick

Action and dysfunction in the Beltway swamp. E-mail tips to george@thenation.com

Congress Approaches a Deal to Keep Student Loan Interest Rates Low

Screwing over young voters is not a particularly wise idea, and much less so with only four months until a presidential election. (It should go without saying that it’s also terrible policy).

College, student loans, student debt, CongressAccordingly, Republicans and Democrats in the Senate are approaching a deal to keep federal subsidized student loans—in which the government pays students’ interest while they are still in school—from seeing a 100 percent interest rate increase on Sunday, from the current 3.4 percent to 6.8 percent.

The crucial context here is that Republicans really don’t think the government should subsidize student loans at all, but have been brought along by political realities.

During the debt ceiling showdown last summer, House majority leader Eric Cantor proposed that the government should stop paying loan interest rates while students are in school, and that the burden should fall to students themselves. That would effectively end the Stafford subsidized program at issue now. The conservative Club for Growth is still advocating an end to the program, and will be scoring the vote.

House Republican leaders initially said they would try to prevent the rate increase, but were pushed forward when Democrats started beating them up—and when even Mitt Romney said he supported an extension of the low rate.

Accordingly, House Speaker John Boehner whipped up a bill that would extend the low rate and pay for it by raiding preventive care programs created by the healthcare reform, which Republicans derisively refer to as an “Obamacare slush fund.” Thirty House Republicans still voted against that proposal, but it passed.

Last month in the Senate, Harry Reid matched the partisan pay-for with one of his own: he proposed a bill that extended the low rate and paid for it by ending a loophole that allowed very wealthy Americans to hide their income and pay less payroll taxes.

The stalemate stood here for weeks, and slowly evolved towards a compromise. Republicans dropped the idea of raiding preventive care money, Democrats dropped the proposal to close the tax loophole, and now we’re looking at pay-fors involving pension funding and tinkering with the post-graduation interest accrual for students. A vote could come as early as today in the Senate.

That’s welcome news, but I can’t help but wonder if Democrats gave in to easy in the name of getting a deal done. They had two winning political issues on their side—helping students and taxing the wealthy. Would Republicans have dared to sacrifice help for students, particularly on the altar of less funding for preventive healthcare? We’ll never know.

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