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Friday, May 4, 2012

Two Parties Find a Way to Agree, and Disagree, on Student Loan Rates

In a second day of campaign-style rallies, Mr. Obama pressed his attack on Republicans, depicting them as unsympathetic to college students in need. Republicans countered by accusing the president and his Democratic allies of playing politics with the issue and trying to raise taxes on small businesses to pay for the subsidized rate.

Caught in the middle were seven million college students who will see the interest rate on their federally subsidized loans double to 6.8 percent on July 1 unless Congress and the White House come together on a plan to prevent that, at a cost of $6 billion. For a typical student, the White House said the higher rate could mean as much as $1,000 in additional debt per year at a time of high unemployment among recent graduates.

Mr. Obama has made the issue his top talking point in recent days as part of an effort to put Republicans on the defensive and duplicate the political success of the payroll tax cut extension last winter. Speaking at the University of Iowa here, he seized on a comment by an aide to Speaker John A. Boehner that the president should focus on fixing the economy.

“This is the economy,” Mr. Obama said with indignation in his voice. “What economy are they talking about? You are the economy.”

Republicans were equally indignant at what they saw as game-playing, saying that they, too, want to forestall the rate increase. They quickly tried to outmaneuver the president.

Late Wednesday afternoon, Mr. Boehner hastily called a news conference to announce that the House would vote Friday on a student loan bill that seemed to take shape just as suddenly. The proposal would extend the current interest rate for federal student loans for one year. The $6 billion cost would be offset by eliminating the remainder of the money from the Prevention and Public Health Fund, a portion of the health care law.

“You know, this week the president’s traveling the country on the taxpayers’ dime,” Mr. Boehner said, “campaigning and trying to invent a fight where there isn’t one and never has been one on this issue of student loans. We can and will fix the problem without a bunch of campaign-style theatrics. “

House Democrats quickly countered that they would offer a bill to maintain the rate by ending tax subsidies for oil and gas companies.

Congress first cut the interest rate on federally subsidized loans in 2007 when Democrats controlled both houses but allowed the cuts to expire after five years because of the cost. The rate moved down gradually each year to 3.4 percent last summer from a high of 6.8 percent. If no action is taken, the rate will jump back up to 6.8 percent this summer.

Mr. Obama included money in his budget to extend the cut, but just for one year. Republicans, in the budget advanced by Representative Paul D. Ryan of Wisconsin, did not finance an extension. But following the lead of Mitt Romney, the party’s presumptive presidential nominee, Republican leaders say they, too, favor extending the lower rate at least temporarily.

“It took me seven years to work my way through college, working every job I could get my hands on,” Mr. Boehner said. “And what Washington shouldn’t be doing is exploiting the challenges that young Americans face for political gain.”

White House officials said the only reason Republicans were speaking out in support was because the president had embarrassed them, and they pointed to a number of past comments by individual members of the opposition questioning the government role in student loans.

Senator Harry M. Reid of Nevada, the Democratic majority leader, introduced a bill to extend the cuts and pay for that extension by preventing some business owners from sheltering their income from Medicare and Social Security taxes.

He plans to hold a vote to try to overcome a potential filibuster, most likely after next week’s recess, giving Mr. Obama a chance to talk about the issue all next week, Democrats said.

Senator Lamar Alexander, Republican of Tennessee, responded with legislation introduced Wednesday to keep the low rate and pay for it by taking money from Mr. Obama’s health care program.

Each plan was devised in a way to make it unpalatable for the other party to vote for it, thus setting the stage for a potentially protracted fight over how to finance the student loan measure. It was a reflection of the fact that Republicans do not want to have the fight Mr. Obama seemed eager for.

“It sounds to me that they know this is not someplace where they want to go,” said Representative George Miller, Democrat of California, who sponsored the original 2007 legislation. “So I think it really is down to how we will pay for it. In this economy at a time when families are struggling and people are concerned about the load of debt, it makes no sense to charge students 6.8 percent.”

Peter Baker reported from Iowa City, and Jennifer Steinhauer from Washington.


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