Democrats and Republicans Agree on Interest Rates, Spar on Offset
In an unexpected turn of events, Republicans unveiled their own bill yesterday that would keep the subsidized Stafford Loan interest rate for undergraduate students at 3.4 percent for one additional year. The Republican bill (H.R. 4628) comes on the heels of a Democratic bill introduced in the Senate (S. 2343) that would also keep interest rates at 3.4 percent for one additional year. In a departure from what has become normal operating procedure, neither of these bills offset the expense of the interest rate reduction by cutting another student aid program.
The Congressional Budget Office estimates it would cost just under $6 billion to keep the subsidized interest rate at 3.4 percent for an additional year. The Democratic proposal would meet that expense by closing what they deem a “tax loophole” for small business owners of S corporations. The Republican proposal would pay for the interest rate extension by cutting mandatory funding from the Prevention and Public Health Fund in the Affordable Care Act.
Since both sides have now agreed to extend the interest rate reduction, the only thing preventing it from happening by July 1 is whether they can agree on how to pay for it.