By Mike Lillis - 04/25/12 06:51 PM EDT
Joining President Obama, Democrats in both chambers are pounding Republicans this week over a proposed extension of low interest rates on student loans.
Democratic leaders in the House and Senate warned Wednesday that doubling the interest rate on Stafford loans from 3.4 to 6.8 percent — as scheduled to occur on July 1 — would harm millions of working-class consumers during a still-shaky economic recovery.
"The president is gonna be on this aggressively and House Democrats and Senate Democrats have also been out there, and we are also going to attack this as aggressively as we can," Rep. Xavier Becerra (D-Calif.) told reporters in the Capitol on Wednesday.
“This is a make or break moment for the middle class,” said Sen. Jack Reed (D-R.I.), a co-sponsor of the Senate bill extending the loan benefit.
The issue has been front-and-center on the presidential trail this week, where Obama is hopping from one college campus to another to drum up public support for extending the 3.4 percent rate.
"We have to make college more affordable for young people,” Obama said Tuesday at University of North Carolina. “That’s the bottom line.”
Obama is scheduled to continue that message Wednesday at the University of Iowa.
The Democrats have an unusual ally in Mitt Romney, the presumptive GOP presidential nominee.
"I support extending the temporary relief on interest rates for students," Romney said Monday, without offering details, during a campaign stop in Pennsylvania.
House Democrats were quick to welcome the endorsement, saying they hope to "enlist" Romney to lobby support from congressional Republicans, who have so far resisted the Democrats' almost $6 billion proposal, citing cost concerns and the "uncertainty" of a one-year extension.
"The Republican leadership in the House has hardly shown a flicker of interest in terms of moving this issue," Rep. Joe Courtney (D-Conn.), the sponsor of the House bill, said Wednesday. "At a time when student loan debt now exceeds credit card debt, car loan debt [and] middle-class families are struggling, this is the most stable, affordable borrowing program for college that exists in America today."
House Speaker John Boehner (R-Ohio) approached the issue delicately Wednesday, saying Republicans are "trying to find a responsible way" to deal with it.
House GOP leaders are already on record this year opposing the student loan benefit. The GOP's 2013 budget proposal, sponsored by Rep. Paul Ryan (R-Wis.), would have returned the Stafford rate to 6.8 percent. The Ryan budget also made cuts to other education programs, including Pell Grants — parts of his budget the Democrats haven't overlooked.
"It comes as no surprise that, in the Republican budget, they put millionaires over Medicare, and they put subsidies to oil companies over subsidies to student loans," Becerra said.
The 3.4 figure stems from a 2007 law, the College Cost Reduction and Access Act, that halved the interest rate on federal Stafford loans. Democratic leaders pushed the legislation in Congress, but it passed with broad bipartisan support: 77 House Republicans and 35 Senate Republicans supported the bill, which then-President George W. Bush signed into law.
Without congressional action, the rate returns to 6.8 percent on July 1.
The current debate seems to be headed for a fight over how to pay the $6 billion tab. On Tuesday, Senate Majority Leader Harry Reid (D-Nev.) introduced legislation to extend the 3.4 percent rate for a year, offset by requiring shareholders in S corporations — typically small-sized businesses — to pay payroll taxes from which they're now exempt.
Reed told reporters that Romney, during his service as governor of Massachusetts, implemented a similar S corporation provision and had called it a “loophole.”
Reed said he hopes Romney will be “consistent" by supporting the Democrats' offset provision.
Sen. Sherrod Brown (D-Ohio) called the tax provision the “Gingrich-Edwards” loophole closer. He accused former Speaker Newt Gingrich and former Sen. John Edwards (D-N.C.) of avoiding hundreds of thousands of dollars in payroll taxes by forming S corporations, paying themselves a small salary and claiming the rest of their income as benefiting their business.
“It is a tax-avoidance scheme,” Brown said.
The senators said they are open to other offsets so long as these do not hurt the middle class, and challenged Republicans to produce their own offset.
Republicans are pushing back, saying the pay-for represents a tax on job creators and that payroll tax increases should not be used for anything other than fixing Social Security and Medicare, the entitlement programs funded largely by the payroll tax.
Indeed, as the Democrats are amplifying their calls to pass the bill, Republicans are launching accusations that Obama and the Democrats are using the popular Stafford loan program merely as a prop for political ends. Senate Minority Leader Mitch McConnell (R-Ky.) accused Reid Wednesday of proposing an offset that was designed to be opposed by Republicans.
"Let’s be honest," McConnell said. "The only reason Democrats have proposed this particular solution to the problem is to get Republicans to oppose it, to make us cast a vote they think will make us look bad to the voters they need to win the next election."
Democrats, meanwhile, are contrasting the $6 billion price tag of the student benefit with the $46 billion cost of the Republican bill extending a 20-percent tax cut to businesses with fewer than 500 employees. House GOP leaders passed the latter measure last week without an offset, meaning the $46 billion will be paid for with deficit spending.
"Forty-six billion dollars added to the deficit, and they did it without a blink," Becerra said Wednesday. "It makes it very clear what the priorities are of the majority in the House of Representatives."
Warned Courtney, "we are going to continue to pound away at this issue, with a count-down clock, until the middle class of this country gets some help."
— Erik Wasson contributed to this report.