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Obama Gains Traction With Student Loan Offensive

Brendan Smialowski/AFP/Getty Images
President Barack Obama is on a three-state tour of college campuses, where he is ripping the GOP for supporting tax cuts for the wealthy at the same time many student loan rates are set to double. But the White House and Congressional Democrats are sure to encounter resistance from Republicans over how to pay for further interest-rate relief.

Updated: 10 p.m.

Days after President Barack Obama began his push to avert a doubling of student loan interest rates, Hill Republicans followed presumptive GOP nominee Mitt Romney’s lead and beat a hasty retreat on the issue Tuesday.

As with the payroll tax cut extension last year, Obama appears to have picked his issue, defined the stakes and successfully backed the GOP into a corner on a popular expiring provision. The strategy again appears likely to deliver the White House a policy, as well as messaging, win.

“I don’t think anybody believes that the interest rate ought to be allowed to rise. The question is how you pay for it,” Senate Minority Leader Mitch McConnell (R-Ky.) said Tuesday, a day after Romney indicated that he supports temporarily extending the low 3.4 percent interest rate, citing the difficult economy.

The White House began to push on the issue last Friday, and Obama is now on a three-state tour of college campuses using the issue to highlight his differences with the GOP — contrasting student loans and other popular government programs with Republicans voting to protect tax cuts for the rich.

“If these folks in Washington were serious about making college more affordable, they wouldn’t have voted for a budget that could cut financial aid for tens of millions of college students by an average of more than $1,000,” Obama said of the Republican Party at a Tuesday event in North Carolina. “They certainly wouldn’t let your student loan rates double overnight.”

Obama then ripped the GOP for spending money on two wars and enacting two tax cuts without paying for them and voting for oil company subsidies and against the Buffett Rule requiring people making more than $1 million a year to pay at least a 30 percent tax rate.

“They even voted to give an average tax cut of at least $150,000 to folks like me, the wealthiest Americans — a tax cut paid for by cutting things like education and job training programs that give students new opportunities to work and succeed,” Obama said. “Now, that’s their priorities.”

But just because the president and Senate Democrats appear to have the upper hand doesn’t mean a partisan battle isn’t brewing on Capitol Hill over how to pay for the extension of low student loan interest rates. It’s a fight the White House and Senate Democrats seem happy to have.

White House Press Secretary Jay Carney told reporters that the White House could support paying for the $6 billion student loan fix by closing a tax provision that allows owners of S-chapter corporations to avoid payroll taxes on pass-through income — an idea under consideration by Senate Democrats.

“It meets the standard that we set that we can’t pay for it in a way that would harm students, and it would also meet the standard that it wouldn’t raise taxes on anybody making under $250,000,” Carney said. But he said the White House is open to other options as well. “We’re not wedded to one,” he said.

Republicans have ripped the idea of taxing small businesses or raising other taxes to pay for the fix.

“Given the effects of the Obama economy on college students, I don’t think the temporary interest rate cut should expire this year. But the way to prevent that is not by raiding Social Security and Medicare while making it more difficult for small businesses to hire college students already struggling in the Obama economy,” McConnell said. “It’s by having the policymakers, not the campaign staff, write the legislation.”

If Congress does not act, more than 7 million students will see interest rates double from 3.4 percent to 6.8 percent starting July 1. The jump is the result of a 2007 law passed by a Democratic Congress and signed by President George W. Bush.

Brendan Buck, a spokesman for Speaker John Boehner (R-Ohio), said Republicans will work to prevent the rate hike but added that Obama should blame Democrats who wrote the 2007 law — not Republicans.

“In yet another effort to distract from his economic record that is leaving 50 percent of new graduates jobless or underemployed, the president is looking to create a fight over how to deal with the rate hike,” Buck said. “If the president was looking to be forthright, he’d admit that this looming rate hike is of his own party’s creation.”

Republicans said tax hikes aren’t going anywhere in either chamber.

If the GOP stays firm against closing any tax loopholes, the debate would then switch to what programs to cut, and Senate Health, Education, Labor and Pensions Chairman Tom Harkin (D-Iowa) vowed that other education programs would not be on the chopping block.

“It will not come from Pell Grants or other things,” Harkin said. “We’re not going to rob Peter to pay Paul on this, no. We’re already at the limit of what we can cut in education.”

Senate Minority Whip Jon Kyl (R-Ariz.) said the existing program runs a profit, one that he said is being used in part to help pay for Obama’s health care plan.

“The government is making a profit. ... You don’t need to make money on students,” he said.

“Let’s just reduce the cost of Obamacare,” he suggested — a nonstarter with the White House.

Majority Leader Harry Reid (D-Nev.) said the bill would be on the Senate floor when the chamber returns from next week’s recess. Reid said the bill would be introduced within 24 hours and will be paid for with the S corporation provision.

Reid also ribbed Romney for backing the student loan fix and the reauthorization of the Violence Against Women Act.

“The Etch-a-Sketch is coming sooner than I thought,” he joked. “He’s for our education bill, now he’s for Violence Against Women. Great.”

Editor's Note:

This article updates the print version to include reactions from Senate Minority Leader Mitch McConnell and details on how the student loan bill would be funded.

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