Expect Student Loan Standoff

Posted May 7, 2012 at 6:37pm

Senate Democrats are poised to savage their GOP counterparts this week over the Republicans’ expected opposition to a bill that would prevent student loan interest rates from doubling this summer.

Though Republicans insist they want to stop the rate hike from going forward, Senate Minority Whip Jon Kyl (R-Ariz.) indicated Monday that the Conference will likely filibuster the Democratic measure because it opposes the proposed offset.

“It’s a tough vote” for Republicans, a Senate Democratic aide said, adding that a vote Tuesday against taking up a Democratic student loan relief bill would likely be used as campaign fodder against the GOP as both parties look to curry favor with younger voters.

President Barack Obama has made a campaign issue out of the bill because interest rates on Stafford loans will jump to 6.8 percent from 3.4 percent if Congress doesn’t act by July 1.

House Republicans have already passed a different version, and presumptive GOP presidential nominee Mitt Romney has said he supports blocking the rate increase. But the Democratic aide said Senate Republicans will have a hard time proving their support for the issue if they vote to prevent the Democratic measure from coming to the floor. That test vote is scheduled for noon Tuesday, and Democrats need 60 votes to move forward. Democrats, who control 53 votes in the Senate, would need at least seven Republicans to vote with them to overcome a filibuster and begin debate on the bill.

Last week, Republican sources indicated they expected to allow Democrats to at least bring the bill up for debate.

Majority Leader Harry Reid attempted to apply pressure on the Senate floor Monday.

“Republicans claim they share Democrats’ goal of protecting these 7 million students,” the Nevada Democrat said. “We’ll see.”

Democratic Sens. Jack Reed (R.I.), Tom Harkin (Iowa) and Sherrod Brown (Ohio) have scheduled a press conference Tuesday morning at which they intend to urge Republicans to allow the Senate to debate the bill.  

Republicans said their opposition is merely an effort to spark talks that will lead to a bipartisan offset and avoid the interest rate increase.

The Democratic legislation would cover the $6 billion cost of preventing the interest rate increase by eliminating a corporate tax loophole that allows the wealthy to pay less in Social Security and Medicare taxes.

Kyl said Republicans do not expect to provide the needed votes to take up the bill.

“We’ll defeat cloture” on the Democrats’ bill, Kyl said Monday. Technically, Tuesday’s Senate vote will occur on a motion to invoke cloture, or limit debate, on a motion to proceed to the bill.

Kyl said the GOP’s opposition is designed to trigger talks between House Republican leaders and Senate Democratic leaders so a compromise can be reached before the July 1 deadline.

“There will be a compromise worked out,” Kyl predicted. “When it’s clear that [Reid’s] version isn’t going to go anywhere, I presume that leaders of the House and Senate will get together and find a way to ensure that the interest rate doesn’t double.”

Kyl said that Republican opposition was also triggered by a concern that Democrats would not permit Senators to offer any amendments to the bill.

“They have not permitted it up to now, and we only have one vote scheduled,” Kyl said.

Republicans oppose the Democrats’ proposed offset because, they say, it would hurt job creation.

Kyl dismissed the idea of the GOP being painted as obstructionists.

“I realize that that is the scenario that the Democrats would like to try to create, but the media and I think our constituents are more sophisticated than that,” Kyl said. “They understand that there is a unanimity to prevent the increase in the interest rate, and it is simply about how to pay for it.”

The GOP also pointed to a letter sent last week to Senate leaders by dozens of business groups, including the National Federation of Independent Businesses and the American Bankers Association, opposing the bill’s offset.

“While the authors describe the targets of this provision as lobby shops and law firms, the application of the ‘Professional Service Business’ definition included in the bill is much broader and could embrace a significant portion of the American economy,” the letter said. “Closely-held businesses engaged in health, real estate, engineering, architecture, consulting, financial services, billing, and other fields could be affected. Moreover, once the line between earnings from labor and capital is removed, we are concerned that this provision could be expanded to include other, more capital intensive industries.”

Republicans prefer a measure similar to the House-passed bill, which would offset the cost of the interest rate cut by eliminating a fund in the 2010 health care overhaul that covers prevention and public health.

The House bill passed 215-195 and received 13 Democratic votes. Thirty Republicans voted against it.  

Kyl said that the he was puzzled as to why Democrats oppose the House offset because the health fund had been tapped to offset the extension of the payroll tax cut.

“We thought we were picking something that might find bipartisan support here since it had been used before,” he said.

But the Obama administration announced Monday that it prefers the Senate offset, saying in a Statement of Administration Policy that it “strongly supports Senate passage” of the bill.