GOP Sen. Alexander proposes student loan interest rate legislation

Sen. Lamar Alexander (R-Tenn.) introduced legislation to keep college student loan interest rates at 3.4 percent by using money from the Obama administration's healthcare reform law.

Alexander introduced the "Student Loan Interest Rate Reduction Act of 2012" on Wednesday, which sets the interest rate on Stafford college tuition loans at 3.4 percent and stops it from rising to 6.8 percent after July 1. Democrats and Republicans are both pushing to keep the interest rate at 3.4 percent, but their proposals vary on the pay for. Alexander's bill draws from an aspect of the Obama administration's healthcare reform law to pay for keeping the rate at 3.4 percent.

The healthcare law provides subsidies to help low-income people buy insurance. If people end up with a bigger subsidy than they should have gotten — which will be common — they have to repay some or all of the extra money. Alexander's bill would require people to pay back more of their excess subsidies.

"President Obama is busy this week on campuses across America talking about student loans. It's a noble goal to talk about making it easier for students to afford college," Alexander said Wednesday. "It's a goal we all share. But I'm afraid the president's not telling the whole story because if he were to tell the whole story what he would have to tell students is that the principal reason for the rise in tuition in public colleges and universities across America and community colleges, and the principal reason for the increase in student loans, is President Obama himself in his own healthcare policies."

Senate Majority Leader Harry Reid (D-Nev.) is introducing a bill to keep the interest rate at 3.4 percent. Reid's legislation pays for the rate extension by blocking shareholders of a certain type of company from avoiding have to pay payroll taxes on some of their income.

On the campaign trail, both President Obama and Mitt Romney have expressed support for blocking the interest rate from rising. President Obama is making a number of speeches throughout the week at college campuses on urging Congress to pass legislation to stop a rate hike. Those speeches and Mitt Romney's support both appear to be a play to appeal to youth voters.

"And what we will propose with this law is that we will keep the interest rate at 3.4 percent for subsidized Stafford loans, beginning with the year July 1, just as President Obama has proposed, just as Gov. Romney has proposed, and we will pay for that by taking back from the healthcare law," Alexander said.