Senators rejected dueling Republican and Democratic plans to stop rates from doubling. Student loan bills stall in Senate

The Senate on Thursday voted twice to try to keep student loan interest rates low – but got nowhere.

Senators rejected dueling Republican and Democratic plans to stop rates from doubling in July, because of partisan fighting – again – over how the $6-billion bill would be paid for.

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Republicans want to divert money from a prevention fund created under the new health care law, while Democrats insist on eliminating a tax loophole for Subchapter S Corporations.

Both plans were largely expected to fail to reach the 60-vote barrier to kill a filibuster. And on Thursday, neither side was budging.

Senate Majority Leader Harry Reid (D-Nev.) went to the Senate floor in the morning to chastise Republicans for wanting to drain the preventive fund, which they deem an unnecessary slush fund.

“The Republican proposal is paid for by stripping Americans of life-saving preventive health care,” Reid said. “The Democratic proposal is paid for by closing a loophole that allows wealthy Americans to dodge their taxes.”

“It’s easy to see these two proposals were not created equal,” he added.

Senate Minority Leader Mitch McConnell (R-Ky.) quickly followed, accusing Democrats of trying to manufacture a scapegoat instead of reaching across the aisle to Republicans. Closing the tax loophole for so-called S Corporations amounts to a tax increase, he said.

Republicans also argue that closing the loophole, used by S Corporations to avoid paying a tax on Medicare, would redirect billions away from the health care program for the elderly.

“We already know how this story ends,” McConnell said. “So why are Democrats forcing us to vote on their failed proposal yet again? Because, as I’ve said, they’re more interested in drawing our opposition — of creating a bad guy — than in actually solving the problem.”

In the House, Speaker John Boehner (R-Ohio) blamed Democrats for the gridlock.

“The House has passed a reasonable and responsible student loan bill and paid for it by eliminating a slush fund that the president and Democrats have already supported cutting,” Boehner said. “If the president and Senate Democratic leaders prefer a different approach, then the onus is on them to offer a solution that can pass both chambers,”

“This issue can be resolved quickly if the Democrats come to the table and offer a responsible solution,” he concluded, “and we hope they will.”

Democrats weren’t having it, though.

“These are lobbyists, these are lawyers who have craftily used Subchapter S Corporations to avoid paying payroll taxes,” Sen. Jack Reed (D-R.I.) said. “This loophole has been criticized on the editorial pages of The Wall Street Journal … I can’t think of a clearer choice.”

The Democratic bill failed 51-43. The Republicans’ bill, which mirrors legislation passed by the GOP-led House in April, failed 34-62. Sixty votes were needed to move the measures along.

The Obama administration has vowed to veto the Republican bill. White House press secretary Jay Carney issued a statement after the votes blaming the GOP for the gridlock.

”With only 37 days left to stop student loan interest rates from doubling on July 1, Senate Republicans still have not proven that they’re serious about resolving this problem,” he said.

Ten Republicans voted against their party’s bill, while one Democrat — Sen. Jim Webb of Virginia — rejected the Democratic version. Sen. Olympia Snowe (R-Maine) voted present on both bills to avoid conflict-of-interest issues with her husband, John McKernan, the chairman of the board of directors of the Education Management Corporation.

Keeping the federal student loan interest rate at the current 3.4 percent has been one of President Barack Obama’s top priorities lately, but so far the legislation has bogged down. Without congressional action, the rate will rise to 6.8 percent in July.

Preventing such an increase would save 7 million college students an average of $1,000 over the life of their loans, according to the White House.

This article tagged under: Student Loans

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