Stop the Student Loan Interest Rate Hike Act

Floor Speech

Mr. REED. Mr. President, on July 1, approximately 7.4 million college students will see the interest rate double on their student loans unless Congress takes action. For every year we fail to act, borrowers will pay $1,000 more in interest on their loans. In January, I introduced S. 2051, the Student Loan Affordability Act, to maintain the subsidized student loan interest rate at the current 3.4 percent. Today, I am proud to join my colleagues Senator Brown of Ohio and Senator Harkin, the chairman of the Health, Education, Labor, and Pensions Committee, in sponsoring the Stop Student Loan Interest Rate Hike Act. This legislation is a fully paid for, 1-year extension of the 3.4-percent interest rate for subsidized student loans.

There is bipartisan support for keeping interest rates low. Governor Romney has endorsed a temporary extension of the current 3.4 percent rate. Two-thirds of Republican Senators voted to cut the interest rate to 3.4 percent under the College Cost Reduction and Access Act of 2007.

The Stop the Student Loan Interest Rate Hike Act will maintain the interest rate at 3.4 percent for another year. The 1-year extension is fully paid for by eliminating a tax loophole that has allowed some shareholder-employees of so-called S corporations to avoid paying their fair share of Social Security and Medicare payroll taxes. This offset will apply only to a subset of S corporations that are professional service businesses--those that derive 75 percent of their gross income from the services of three or fewer shareholders or where the S corporation is a partner in a partnership whose primary activity is professional services. Additionally, the offset only impacts filers with income over $250,000, filing jointly, or $200,000, single filer.

The nonpartisan Government Accountability Office, GAO, found that in the 2003 and 2004 tax years, individuals used S corporations to underreport over $23 billion in wage income. The median misreported amount was $20,127.

Closing this loophole will fully offset the $6 billion cost of a 1-year extension of the interest rate and would make the Tax Code more fair. It is a win-win proposition.

Some may say that the Federal Government cannot afford to forgo the higher interest payments because of the budget deficit. However, this legislation is fully paid for and should garner support from both sides of the aisle.

It is a matter of priorities. We need to put the interests of middle-class Americans ahead of those who would avoid paying their fair share in taxes.

Student loan debt affects millions of Americans. Two-thirds of the class of 2010 graduated owing student loans, with an average debt of over $25,000. Student loan debt has passed the $1 trillion mark--exceeding credit card debt. Moreover, the students and families we are trying to help with the Stop the Student Loan Interest Rate Hike have demonstrated economic need. Indeed, nearly 60 percent of the dependent students who qualify for subsidized loans come from families with incomes of less than $60,000.

The question before us is, Will we make the student loan debt burden worse by allowing interest rates to double or will we take action to protect low and moderate income students?

We need to act fast. July 1 is only 66 days away. I urge all my colleagues to join with Senator Sherrod Brown, Chairman Harkin, and me in supporting the Stop the Student Loan Interest Rate Hike Act.

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