House OKs freezing of student loan rate

WASHINGTON – Setting the stage for another political showdown, the House on Friday narrowly passed a Republican plan that would stop an interest-rate hike on student loans – paid for with funds from President Barack Obama’s health care law.

Democrats want the rate kept low, but objected to eliminating a fund for public health and prevention programs to finance it. The GOP approach, they contended, was an attack on women and children who benefit from such programs. The White House vowed to veto the legislation, calling it a “politically motivated proposal,” and noted that the health fund provides hundreds of thousands of screenings for breast and cervical cancer.

If Congress fails to come to an agreement, loan rates for 7 million college students will double to 6.8 percent on July 1. The rate increase would hit new loans.

In seeking to avoid this latest partisan battle, House Speaker John Boehner, R-Ohio, may have launched one by quickly pushing forward the legislation with little Democratic support. The House vote was 215-195. The legislation is essentially dead on arrival in the Senate, where Democrats have proposed taxing higher-income households to fund the loan program.

Nevertheless, Republicans have calculated that swift passage of their bill means they can shift the blame back to the White House. The president in recent days has been traveling to college campuses around the country to rally students on keeping rates low.

The 3.4 percent interest rate on federally subsidized loans was set in a 2007 law that expires this summer. Both parties see the student-loan issue as a good way to appeal to middle-class voters in this election year but disagree over how to cover the $6 billion cost.

Democrats say that eliminating the health fund is a non-starter, even though Obama agreed to tap it earlier this year to defray other costs. The Senate Democrats’ proposal would close a tax loophole on upper-income earners who organize their small companies as so-called subchapter S corporations.

Individuals making more than $200,000 annually, and couples making more than $250,000, in those companies with three employees or fewer would be required to more fully report their corporate profits as taxable income.

In the House, Democrats sought to tax oil companies.

As in previous moments of brinkmanship, lawmakers are again wading into risky political terrain. Republicans figure that concerns over the size of the federal government and the administration’s tax policies will prove more powerful than the political popularity of the loan rate cut.

Still, Boehner faced opposition in his own party, with 30 GOP lawmakers – including Rep. Raul Labrador of Idaho – abandoning the effort. Conservative groups said the federal government should stay out of the student loan business, and pushed a “no” vote. Boehner was forced to rely on more than a dozen Democrats to ensure passage, showing how difficult it will be to craft an eventual compromise without Democratic support.