Senate Democrats and Republicans have failed to pass competing versions of legislation aimed at preventing federally subsidized student loan interest rates from doubling in July.
The interest rates are scheduled to rise from 3.4 to 6.8 percent on July 1 for approximately 7 million college students, according to the
Senate Majority Leader Harry Reid, D-Nev., instead wants to pay for the cost of extending the subsidized interest rate on student loans by ending a tax break that enables accounting firms, legal firms professional services firms, and some small businesses with three or fewer shareholders to collect part of their income as profits as opposed to salary, thereby lowering their payroll taxes.
The Democrats’ bill would amend the Tax Code and the Social Security Act to require certain shareholders of a subchapter S corporation engaged as a partner in a professional service business to include the income or loss attributable to the business in their net earnings from self-employment for employment tax purposes. The bill would restrict the tax treatment to shareholders whose modified adjusted gross income exceeds a specified amount that varies based on their tax filing status. The Reid bill, known as the “Stop the Student Loan Interest Rate Hike Act of 2012,” defines a “professional service business” as any trade or business providing services in the fields of health, law, lobbying, engineering, architecture, accounting, actuarial science, performing arts, consulting, athletics, investment advice or management or brokerage services.
The Reid bill failed to overcome the 60-vote hurdle needed in the Senate to invoke cloture and avoid a filibuster earlier this month. It was again defeated on Thursday, along with the Republican alternative that would have used the preventative treatment funds from the health care reform law.
Reid and Senate Minority Leader Mitch McConnell, R-Ken., traded accusations about the other party’s political maneuvers.
“Americans have seen that obstruction time and again this Congress,” said Reid. “They are frustrated with the slow pace of Senate action to reauthorize the Violence Against Women Act, on Iran sanctions and on legislation to stop interest rates from doubling on federal student loans. Earlier this month, Republicans blocked one attempt to keep higher education affordable for 7 million students. But Democrats haven't given up. I only hope our Republican colleagues will come to their senses and allow us to prevent this crisis before it's too late.”
McConnell said it was time for the two sides to begin bipartisan negotiations to resolve the issue. “So here we are, in a ridiculous staring contest, waiting for Democrats to offer a proposal that can actually pass when we’ve already got one right in front of us,” he said. “We’ve wasted two weeks on this issue for no good reason. Neither I nor the ranking member have heard a word from Democrats on how they think we can resolve this issue. And as we learned earlier this week, the President doesn’t seem to talk with committee chairman anymore. All of this suggests that the White House doesn’t really want to solve the problem, that it would rather allow these rates to double in a few weeks so he can run around all summer pointing the finger at Republicans. But I’d still like to believe that’s not the case. When I sat down with the President last week at the White House, he assured me when I asked him about this that he did, in fact, want to address this issue. Yet the fact of the matter is, all he’d have to do is pick up the phone and tell the Democrat leadership to get this done, and it’d get done. Unfortunately, we can’t just all wait around hoping the President’s going to pick up the phone. College students can’t wait either. They want us to resolve this issue now. And I know we can.”
To move the ball forward, McConnell said he would ask Reid to agree to allow Senators Tom Harkin, D-Iowa, and Mike Enzi, R-Wyo., to sit down and negotiate on an offset that both parties could agree on without having to wait any longer. “They are the chairman and ranking member of the committee that oversees the student loan legislation,” he said. “They just successfully negotiated a bipartisan FDA bill. Let’s see if they can do the same on this.”
