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It's getting closer to the time for 7.4 million college students to start sweating interest on federal loans, but polls suggest incentive for compromise.
The Senate today failed to advance legislation that would prevent a doubling of financing costs on popular Stafford loans on July 1. Republicans balked at a Democratic plan to pay the tab with a Medicare and Social Security tax on earnings from private corporations.
The impasse sets up critical bargaining on Capitol Hill, where the two political parties appear to have their gaze on the November elections earlier than usual.
The GOP-run House last month passed its version of an interest fix that would keep rates from jumping to 6.8 percent. But that bill's means to finance the $6 billion annual subsidy — stripping preventive health-care services from the new health insurance law — is highly objectionable to Democrats.
In today's party-line 52-45 Senate vote against advancing the Democratic plan (with 60 needed to pass), Republicans accused Democrats of election-year politics. Afterward, Sen. Roy Blunt, R-Mo., sounded a political note in explaining his 'no' vote.
“College students and recent college graduates face fewer job opportunities and less income in the Obama economy," Blunt said in a statement. "Instead of compounding the problem with more bad policies that raise taxes on small businesses and raid Social Security and Medicare, we must work together to prevent a rate increase on students and make it easier for job creators to hire them when they graduate.”
Blunt and Republicans distributed a letter in opposition to the Democratic plan signed by a long list of business associations, among them the U.S. Chamber of Commerce, the American Bankers Association, and Associated General Contractors of America.
The letter asserted that the Democratic plan would sock a variety of closely held businesses, from real estate to consulting. Active shareholders of 'S' corporations would be required to pay payroll taxes on both wages and earnings, a "provision that could be expanded to include other, more capital intensive industries," the letter read.
Missouri Sen. Claire McCaskill, offering reasons why she voted with her Democratic colleagues, said: "If we’re going to keep this economic recovery moving in the right direction, then we’ve got to make college more affordable and accessible and make sure our kids and grandkids can compete for the jobs of the future. That’s what this fight is all about.”
The student loan standoff is one of several deadline matters on which Congress is far from agreement. Another -- avoiding post office closings -- could come to a head shortly.
A poll out today suggested that Democrats held the edge in popular sentiments as far as paying for the student subsidies.
Half of the 999 people interviewed in the National Journal United Technologies survey said they favor Democrats’ means to pay for the student subsidies, as opposed to 34 percent on board the GOP plan. The rest favored neither plan or had no reply.
Predictably, young people 18-29 supported the Democratic plan by a 2-1 margin. A gender gap that is pronounced in this season's presidential politics also was reflected, with women heavily supporting the Democratic plan.
The loans in question average about $4,200 yearly and are designed for low-income and middle-income students. The interest rate was lowered to 3.4 percent under an agreement in a Democratic-controlled Congress five years ago but that legislation is expiring.
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