Student Loans: Interest Rate Bill By George Miller Would Cut Tax Loopholes To Keep Rate Down For A Year

As President Barack Obama makes his way across the country to slam an impending increase in federal student loan-interest rates, a group of congressional Democrats is announcing plans to introduce a legislative fix.

Rep. George Miller (D-Calif.), the ranking member of the House Education and Workforce Committee, announced late Tuesday plans to introduce the "Stop the Student Loan Interest Rate Hike of 2012." According to Miller, the bill would prevent the interest rate for federally subsidized Stafford loans from doubling from 3.4 percent to 6.8 percent for one year.

The bill would pay for the extension of the interest-rate cut -- an estimated $6 billion -- by closing a loophole that allows Americans making more than $250,000 from certain corporations to avoid paying Medicare payroll taxes.

But the measure is unlikely to garner bipartisan support. Already, an amendment to Rep. Paul Ryan's (R-Wis.) budget that would have paid for the extension in a similar manner didn't make it out of committee.

Miller's new bill would save more than 7 million borrowers an average of $1,000. Representatives John Tierney (D-Mass.), Tim Bishop (D-N.Y.), Joe Courtney (D-Conn.), Ruben Hinojosa (D-Texas) and Pete Stark (D-Calif.) are co-sponsors.

"Last month, House Republicans voted for a budget that relies on hiking student loan interest rates, while this month they voted to cut taxes again for millionaires and billionaires," Miller said in a statement. "I urge them instead to join me and my Democratic colleagues in standing up for students by stopping the hike. The clock is ticking. The time to act is now.”

Sen. Tom Harkin (D-Iowa), who chairs the Senate Health, Education, Labor and Pensions Committee, plans to introduce, along with majority leader Harry Reid (D-Nev.), a companion bill that would pay for the measure the same way, a Harkin staffer said.

Representatives for Rep. John Kline (R-Minn.), who chairs the House education committee, did not immediately return requests for comment. But in his last public statement on the issue Friday, Kline said he has "serious concerns about any proposal that simply kicks the can down the road and creates more uncertainty in the long run."

The debate stems from the expiration of the College Cost Reduction Act of 2007, introduced by Miller, which was designed to progressively reduce the loan interest rate to 3.4 percent over three years. The bill will expire July 1. (Politico reported Monday that as a senator, Obama missed the votes on that bill.)

The president first raised the topic in his 2012 State of the Union address, and during a three-swing-state trip to appeal to young voters this week, is publicly pressing Republicans to keep the rate down. "For some time now, I’ve been calling on Congress to take steps to make higher education more affordable, to prevent these interest rates from doubling, and to extend the tuition tax credit that has saved middle-class families millions of dollars, but also, to double the number of work/study jobs over the next five years," Obama told college reporters Tuesday.

The sticking point in Congress, thus far, appears to be payment. A spokesperson for Kline has said publicly that extending the 2007 law would necessitate pulling money from other higher-education programs. "Tackling the challenge of the Stafford loan interest rate will require tough choices," Kline representative Jennifer Allen said in early April.

But Harkin said on a Monday conference call organized by Obama for America that plugging the hole with education cuts was not an option. "I'm sorry, I'm not going to rob Peter to pay Paul," Harkin said. "We're up against a wall right now in terms of education funding. If we can pay for this, we'll get the money from some other place, but not from education."