Divided along mostly partisan lines, the Senate refused Wednesday to take up a Democrat-backed bill that would have enabled individuals to refinance existing student loans to the lower interest rate Congress approved last year for new borrowers.
Among the roadblocks: Democrats proposed paying the $55.6 billion price for the lower rates with a tax increase on people who make more than $1 million a year.
“Billionaires or students,” said Sen. Elizabeth Warren, D-Mass., the sponsor of the proposal. “Investing in students and asking millionaires to pay their taxes seems pretty fair to me.”
Republicans called the bill a “political stunt,” saying Democrats had proposed it as an election campaign tool rather than addressing the problems with higher education.
Sen. Lamar Alexander, R-Tenn., the ranking member of the Senate Committee on Health, Education, Labor and Pensions, dubbed the payment mechanism a “class warfare tax.”
Republicans also pointed to a report from the Congressional Research Service that found the legislation would amount to an average of $1 a day in savings for those with student loan debt.
“College graduates don’t need a $1-a-day tax subsidy to pay off their loan, they need a job,” Alexander said. “Why would we spend time on this if it doesn’t deal with the real issues? The real problems with student loans are complexity and over-borrowing.”
Forty million Americans are in the process of paying back a total of $1.2 trillion in student debt.
The bill would have allowed borrowers with standard undergraduate loans, for example, to reduce their interest rate from an average of 6.8 percent to 3.86 percent. The lower rates are based on bipartisan legislation from last year that fixed new student-loan rates to those of the market.