Republicans Pass House Bill to Extend Interest Rate
President Obama has vowed to veto a Republican bill passed by the House Friday that would keep the subsidized Stafford Loan interest rate for undergraduate students at 3.4 percent for one additional year by repealing part of Obama’s health care act. The bill passed by a vote of 215-195.
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 House Republican plan (H.R. 4628) would pay for the interest rate extension by repealing the Prevention and Public Health Fund, a disease prevention fund created by the Affordable Care Act. The fund provides for an "expanded and sustained national investment in prevention and public health programs (over the FY 2008 level)" to support programs authorized by the Public Health Service Act, including prevention research, preventative health screenings and immunization programs.
Though Democrats say the prevention fund would particularly benefit women with support for screenings for breast and cervical cancer, House Speaker Joan Boehner has called the fund a “slush fund,” noting that $5 billion has already been drawn out of the fund to cover the payroll tax cut extension signed into law earlier this year. President Obama’s fiscal year (FY) 2013 budget also calls for reductions in the fund that amount to $4 million over 10 years beginning in 2014.
The Senate is expected to vote in the coming weeks on the Democrats’ proposal (S.2343) that would cover the cost of extending the 3.4 percent rate by amending tax law to close a small business tax loophole for some shareholder-employees of S Corporations. Current law states that S Corporations avoid paying corporate taxes by passing on earnings to shareholders who report the income on their taxes, however if the shareholder is an employee they can report the earnings as profit rather than wages, evading payroll taxes.
While both bills outline two very different plans to offset the expense of extending the interest rate, in a departure from normal operating procedure, neither bill does so by cutting another student aid program. Both plans would raise $6 billion over a 10-year period to fund the one-year extension.
NASFAA joined the American Council on Education (ACE) and other higher education associations in sending a letter last week to House members expressing the community's strong support for enacting legislation to maintain the subsidized Stafford student loan interest rate at 3.4 percent.