WASHINGTON -- As President Obama goes to college campuses to make the case for keeping student loan interest rates low, congressional Democrats are preparing legislation that would prevent a sharp rate increase this summer -- paid for with a tax on larger professional incomes.
“We should be doing everything we can to put higher education within reach for every American,” said Rep. George Miller of Martinez, the top Democrat on the House Education and the Workforce Committee.
Republicans are already objecting to the Stop the Student Loan Interest Rate Hike Act of 2012 because the costs to the government of maintaining the low rates would be paid for by closing a tax break on certain professionals earning beyond $250,000 a year.
Republicans have been grousing over the $6-billion cost to keep the loans at the 3.4% rate for another year. The legislation was first approved in 2007 and is set to expire July 1, which would result in a doubling of interest rates to 6.8% for about 7 million students.
GOP presidential contender Mitt Romney this week threw his support behind keeping interest rates low, and Republicans appear to be reluctant to pick a fight in an election year over an issue that resonates with middle-class households.
“I don't think anybody believes this interest rate ought to be allowed to rise. The question is, how do you pay for it?” said Sen. Mitch McConnell of Kentucky, the GOP leader. “How long do you do the extension?”
The Democratic proposal is being formed, but is expected to raise revenue by changing the way taxes are calculated for individuals that draw income from so-called sub-chapter S corporations or limited partnerships. Such a change would target professional service business -- including lawyers, lobbyists, investment advisors and others. The change would be applied to those earning beyond $250,000 a year.
Rep. Pete Stark (D-Fremont) said that “critical matters of fairness” are addressed by targeting larger incomes to help cover the costs of higher education.
Republicans have been resistant to almost any type of tax increase. They argued Tuesday that income tax revenue intended for Medicare and Social Security should not be diverted, especially after a report this week showed the two programs were facing continued financial difficulties. http://www.latimes.com/health/la-na-medicare-report-20120424,0,7399775.story
“This makes no sense,” said Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee.