April 27 (Bloomberg) -- House Republicans and Democrats favor legislation preventing the U.S. student-loan interest rate from doubling on July 1, though they can’t agree on how to finance the subsidy’s $5.9 billion cost.
Lawmakers in the Republican-led U.S. House, seeking to stem political momentum President Barack Obama seized by highlighting the issue during a tour of college campuses earlier this week, are poised to pass legislation today to extend the 3.4 percent rate for one year.
Republican leaders introduced the measure on April 25 as Obama concluded a tour of college campuses in North Carolina, Colorado and Iowa. Without action by Congress, the interest rate on federally backed student loans would increase to 6.8 percent on July 1.
To finance the 12-month extension, the Republican measure would take $5.9 billion from what House Speaker John Boehner called “one of the slush funds in the president’s health-care law.” The rest of the $11.9 billion fund would be used for deficit reduction.
The speaker said there is precedent for using money from the Prevention and Public Health Fund, noting that $4 billion was taken with Democratic approval to help finance an extension of a payroll-tax cut.
House Minority Leader Nancy Pelosi of California called the plan “another assault on women’s health,” telling reporters that Democrats “will not support a bill that robs Peter to pay Paul.”
Republicans “consider it a slush fund to pay for women’s health,” she said. “We consider it an absolute necessity.”
Boehner, an Ohio Republican, accused Obama of inventing a “fake fight,” maintaining that Republicans weren’t going to allow the interest rates to rise.
“It’s time for the Obama campaign to pony up and reimburse the Treasury” for a trip intended “to make a campaign issue out of this,” Boehner said yesterday, referring to Obama’s campus swing.
Obama’s political tactics “are not worthy of his office,” Boehner said. “This is the biggest job in the world, and I’ve never seen a president make it smaller.”
White House spokesman Jay Carney said, “We assiduously follow all the rules” on the cost of presidential trips.
Senate Majority Leader Harry Reid moved to call for a May 8 procedural vote on a Senate version of the measure when Congress returns to Washington from a one-week recess. The House Republican plan “doesn’t sound like a good deal to me,” the Nevada Democrat said.
Professional Service Firms
The Senate plan would raise $9 billion by requiring small law, accounting and other professional services firms with three or fewer shareholders to pay withholding tax if they make more than $250,000 annually. Partners in such firms now treat the income as profits to avoid withholding taxes.
Obama and Mitt Romney, the presumptive Republican presidential nominee, are both courting the youth vote in a race projected by pollsters to be close.
The former Massachusetts governor joined Obama in urging lawmakers to freeze interest rates students pay for the government loans while blaming him for an economy in which “50 percent of recent college graduates are unemployed or underemployed.”
A new Gallup Poll shows Obama must generate more enthusiasm among younger people to ensure they vote, even though he leads Romney 64 percent to 29 percent among people ages 18 to 29. Only 56 percent of young registered voters said they will definitely vote in November, according to the poll conducted April 20-24. Romney leads Obama by 12 percentage points among voters age 65 and older, and 86 percent of this group said they planned to vote.
Heritage Action for America, a pro-Republican political action group, urged defeat of the student-loan measure, saying the vote would be among those used to rate lawmakers. “Not only do the subsidies fail to stem the rising cost of a college education, the loans are also easily attained, increasing the likelihood taxpayers will be left on the hook when students default,” the group said in a statement.
The House bill is H.R. 4628.
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