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Senate rejects GOP, Democrat plans on student loans

By Alan Fram

Associated Press

Published: Thursday, May 24 2012 8:02 p.m. MDT

In this May 8, 2012, file photo political science major Clarise McCants of Philadelphia is flanked by Sen. Sherrod Brown, D-Ohio, left, and Sen. Jack Reed, D-R.I., right, as she talks about student loans on Capitol Hill. The student loan bill underscored the current partisan positioning in Congress, that's producing little that will become law. If want to keep federally subsidized loan interest rates from doubling on July 1 for millions of college students, and you're a House Democrat, you had to vote for a Republican bill, financed by obliterating a preventive health program created in the Democrat-cherished health care overhaul; if you were a Senate Republican, you had to support a Democratic bill, financed by boosting payroll taxes on upscale owners of some privately owned companies, a nonstarter for most Republicans.

J. Scott Applewhite, File, Associated Press

Enlarge photo»

WASHINGTON — The Senate rejected dueling Democratic and Republican plans on Thursday for averting a July 1 doubling of interest rates on federal college loans for 7.4 million students, pushing back efforts to resolve the election-season showdown until next month.

In mostly party-line roll calls, senators voted 62-34 against the GOP package and 51-43 for the Democratic version, with each falling short of the 60 votes needed for approval. Though both defeats were preordained, the twin votes gave lawmakers from each party a chance to show they favor easing students' financial burdens — and potential grist for campaign ads accusing the other side of opposing the effort.

The Senate planned to leave town later Thursday for a Memorial Day recess running through next week. Neither party wants to be accused of letting the interest rates grow at a time when voters are focused on coping in today's rough-edged economy, giving each side an incentive to eventually strike a compromise.

A 2007 law gradually reduced interest rates on subsidized Stafford loans for low- and middle-income undergraduates to 3.4 percent. To save money, it mandated that rates return to 6.8 percent for new loans as of July 1.

President Barack Obama has made preventing a rate increase a priority and has appeared at colleges and on television talk shows to promote it. Though some Republicans expressed early concerns that retaining the lower rate would fuel college tuition increases, likely GOP presidential candidate Mitt Romney endorsed freezing the rate and most GOP lawmakers have done the same.

Ten conservative GOP senators opposed their own party's proposal, with some expressing concerns about budget costs and saying the loan market should set its own prices.

Both measures rejected Thursday would delay the interest rate increase for a year at a cost of $6 billion, but each side's bill was paid for in a way the other couldn't tolerate. Democrats proposed raising Social Security and Medicare payroll taxes on high-earning owners of some privately held companies and professional practices, while Republicans would abolish an Obama preventive health program.

That idea drew a White House veto threat when Republicans used it to pay for their House-passed bill in April.

"The Republican proposal is paid for by stripping Americans of lifesaving preventive health care," said Senate Majority Leader Harry Reid of Nevada, adding, "It would be a shame" to do that.

Senate Minority Leader Mitch McConnell of Kentucky argued that the Democratic plan showed they wanted "a scapegoat more than a solution" because they knew Republicans would oppose its tax provision.

He also tried goading Obama, saying, "If the president's got time to run around to late-night comedy shows and college campuses talking about this issue, then he can pick up the phone and work out a solution."

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