Democrats and Republicans agree they need to keep the interest rate on federal student loans right where it is.
They just disagree on how to finance it.
Republicans in the U.S. House of Representatives passed a bill last week that would keep the current interest rate of 3.4 percent by cutting the Prevention and Public Health Fund, which is part of Obama’s Affordable Care Act.
Illinois U.S. Senator Dick Durbin said Tuesday that cutting the Prevention and Public Health Fund is not responsible.
“We’re not saving money for America by reducing childhood immunizations to pay for student loans,” Durbin said. “We’re going to end up paying for that too in the long haul.”
He and other Senate Democrats are sponsoring a bill that would keep the interest rate on federal student loans at its present level by closing a tax loophole.
“What we do in the Senate instead is close a tax loophole that’s been available for those who make a lot of money in subchapter S corporations.” Durbin said.
Subchapter S corporations are small businesses like a doctor’s offices or a law practice. Currently, subchapter S corporations are not required to pay the typical corporate tax.
U.S. Representative Judy Biggert (R, Ill.) sponsored the House version of the bill.
She said the Senate’s bill would raise taxes for subchapter S corporations, which would ultimately hurt job creation.
“The other side of the aisle and Senator Durbin want to use, to tax the small businesses — the employers and the job creators — who will actually employ these students once they graduate.”
Biggert said cutting the Prevention and Public Health Fund would make more sense. She said the fund is discretionary, and cutting it would save $6 billion.
If Congress doesn’t act, the interest rate on federal student loans would double after July 1.