Democratic Congressman John Yarmuth wants to lower student loan interest rates permanently without paying for them.
Last month, House Republicans passed the “Small Business Tax Cut Act” which would provide a $46 billion tax cut plan for businesses with fewer than 500 employees. Proponents argue it would help job creators grow the economy, but estimates from nonpartisan policy groups show the tax breaks will benefit the wealthiest income earners.
Yarmuth says if GOP lawmakers are willing to add that amount to the debt for the wealthy then Congress should be willing to do the same for students.
“A 46 billion dollar tax cut that would go to the 3 percent of highest income earners. And they didn’t find any need to pay for that,” he says.
In less than two months, Stafford student loan interest rates are set to double and observers predict the student loan bubble could have devastating effects on the economy.
Last week, Senate Republicans successfully filibustered a Democratic bill to prevent student loan interest rates from doubling that paid for the student loans through closing Social Security and Medicare tax loopholes.
The GOP-controlled House passed its version of the measure, however, it is unlikely the Democratic-controlled Senate will pass it.
The debate continues to center on how to pay for the loans, which would cost the federal government $6 billion. It is estimated the U.s. will make over $300 million from student loans at the current 3.4 percent interest rate.
Yarmuth says if lawmakers allow Stafford interest rates to double it is equivalent to a tax increase for students and young adults.
“This is not something that costs the government money. It actually makes money for the government. Yes, it would be more if they charged 6.8 percent, but that money would come directly out of the pockets of young adults and very middle-income Americans, amounting to a tax increase effectively of about $1,000 a year on average,” he says.