[Congressional Record (Bound Edition), Volume 158 (2012), Part 4]
[Senate]
[Page 5526]
[From the U.S. Government Publishing Office, www.gpo.gov]




              STOP THE STUDENT LOAN INTEREST RATE HIKE ACT

  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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