Reid’s bill to freeze student loan interest rates fails in the Senate

By Karoun Demirjian

Tuesday, May 8, 2012 | 5:04 p.m.

A Democrat-backed measure to extend current interest rates for government student loans failed Tuesday on a party-line vote in the Senate, putting hard numbers on an already-certain reality: Political differences will trump common policy objectives, meaning this fight will go down to the wire.

“We already know we want to get the result; we have a difference over the pay for,” Senate Minority Leader Mitch McConnell said Tuesday.

He’s right.

Democrats and Republicans have said they want to freeze the current 3.4 percent interest rate for a year, preventing it from doubling to 6.8 percent on July 1.

Democrats want to offset the cost of that change by getting rid of a tax loophole that lets certain corporations avoid paying Medicare and Social Security taxes. They failed to muster the necessary 60 votes on the bill, which failed in a 52-45 vote. Republicans would rather pay for it by stripping money from a new fund for preventive health care created under the health care law.

Sen. Harry Reid accused Republicans of staging a political “rope-a-dope.”

“That’s very interesting. If they want to offer an amendment on how to pay for it, other than what they have in the House ... let’s vote on them,” Reid said. “It’s all for show.”

The House bill — which passed by a 215-195 vote late last month — is exactly what Senate Republicans are proposing: A cost offset that trades low student loan rates for the end of a fragment of the health care law.

“Instead of compromising, the Democrats want to raise taxes on small business at a time when we need jobs,” said Nevada Sen. Dean Heller, who voted against the measure. “They brought this vote to the floor knowing that it wouldn’t pass.”

There’s still almost two months to go before interest rates spike. But Reid promised Tuesday that Democrats wouldn’t let go of their position any time soon.

“We’ll definitely have more votes on this bill,” he said.