Student loan subsidies in a tangled budget web
Student loans versus oil companies. Or student loans versus high-paid lawyers and consultants. Or student loans versus Democrats’ health care law.
While Capitol Hill spars over how to pay for the $6 billion cost, Republicans and Democrats made one thing clear this week: College students will get a helping hand from the government in the form of continued subsidies for their student loans.
But along the way, each party is offering up one of its favorite political targets in an effort to frame the debate as a choice between young college students and others whom each side paints as less worthy.
The House is barreling toward a vote Friday on the Republicans’ preferred version, which would slice a catch-all prevention fund from President Obama’s 2010 health care law and use the savings over the next decade to pay for a one-year extension of student loan subsidies.
“We do not want to see these interest rates go up, and there was never any thought these interest rates would go up,” said House Speaker John A. Boehner, Ohio Republican, who hastily announced Wednesday evening that he was scheduling the House vote.
He made the announcement after Mr. Obama spent Tuesday and Wednesday visiting three college campuses in electoral battlegrounds North Carolina, Colorado and Iowa and demanded that Congress take action on student loans.
With the issue elevated to the top of the campaign, and with Mr. Obama counting on heavy support among college students, the Republicans decided to head off the issue.
All sides now say they want to extend the loan subsidies, which were passed in 2007 and lowered the interest rate on government-subsidized loans from 6.8 percent to 3.4 percent. But when Democrats wrote the legislation, they imposed a five-year limit, which expires June 30 — leaving all sides scrambling to find a way to extend it.
The chief obstacle: the cost, which will be $6 billion to extend the subsidy for the next school year.
But House Minority Leader Nancy Pelosi, California Democrat, said eliminating theprevention fund amounted to an “assault on women’s health” because some of the money included goes to cancer screenings and children’s immunizations.
“It may be a slush fund to him, but it’s survival to women,” Mrs. Pelosi said.
Women’s programs do make up some of the money, but in 2012 the fund also is spending $5 million on first lady Michelle Obama’s “Let’s Move” campaign, tens of millions of dollars on administrative streamlining, $10 million on suicide prevention and nearly $100 million on reducing tobacco use.
Mrs. Pelosi’s preferred plan instead would cut tax breaks for gas and oil companies — an option that has been repeatedly defeated in both chambers, but which Democrats think will become more politically potent as the election nears.
“Their priority is to protect the subsidies for Big Oil; our priority is to prevent breast cancer, cervical cancer, to immunize our children so that they are healthy,” Mrs. Pelosi said.
Senators wrapped up business Thursday and headed home for a vacation next week. When they return, they will face an early test vote on yet another student loan bill, offered by Majority Leader Harry Reid, Nevada Democrat.
Mr. Reid covers the $6 billion cost by changing a tax formula to catch what is called pass-through income. That’s where someone sets up a company and takes most of his income as company profits that pass through to him. That allows him to avoid paying Medicare payroll taxes on that pass-through income. Mr. Reid ends that option for those making $250,000 or more a year.
Democrats argued that the Republicans are quickly trying to backslide on this issue. While Mr. Obama’s proposed budget called for extending the interest-rate subsidy, the House GOP’s budget did not — and Republicans on the Budget Committee defeated an amendment that would have extended it.
At the White House, press secretary Jay Carney said the administration could support a number of different ways to pay for the extension, but said the president’s health care law should not be one of them.
“Let the election decide that. Let’s solve the student loan rate problem now and focus on pay-fors that are reasonable and acceptable,” he said.
But in a sign of the political overtones of every fight this year, Mr. Boehner took aim at the president’s two-day swing through college campuses.
Mr. Boehner said the trip was an attempt to manufacture a political issue. The Ohio Republican demanded that Mr. Obama’s campaign reimburse the federal Treasury for the costs of flying Air Force One on the trip — which Mr. Boehner said amounted to $179,000 an hour.
“This is the biggest job in the world, and I’ve never seen a president make it smaller,” Mr. Boehner said. “The president keeps attempting to invent these fake fights because he doesn’t have a record of success or a positive agenda for our country.”
Mr. Carney said the Obama campaign is following all rules that govern dividing political costs and official business costs, and he said previous presidents have done the same thing.
“There’s an effort to politicize this, an effort to hide the fact that they have a policy problem on their hands,” Mr. Carney said. “But our interest, the president’s interest, is ensuring that this matter be taken care of on behalf of American college students.”
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