Mr. REED. Mr. President, the vote we will take today will affect millions of Americans. If we do not enact legislation before July 1 of this year, approximately 7.4 million students will see the interest rate on their student loans double.
Nearly 200 student government leaders, representing more than 2.5 million college students across the Nation, have asked us to come up with a bipartisan solution to keep the interest rate from doubling this July.
Hundreds of thousands of students, parents, educators, and concerned citizens have called and written to their Senators and Representatives with a simple message: Don't double the rate.
For them, student loan debt is not a trivial matter. It is a matter of going to school, and it is a matter, ultimately, of the jobs they take and their ability to pay off those loans during their working life.
Without action, students will pay, on average, an additional $1,000 for every year they have to take student loans, if we let this rate double.
Two-thirds of the class of 2010 graduated owing student loans, with an average debt of over $25,000. They are walking out of school with a degree and a huge debt. If we do not fix this problem, beginning today, that debt will be larger for their successes in the years ahead.
Student loan debt collectively has passed the $1 trillion mark--exceeding credit card debt. In fact, there are some who speculate this is the new bubble that is coming upon our economy. This is a serious issue.
The good news is that there seems to be for at least the principle of preventing this increase--an emerging bipartisan consensus that we should not allow the rate to double. The bad news is that my colleagues on the other side have chosen to use the student loan interest rate as another opportunity to attack health care. They have proposed to pay for the extension by cutting funds to the Prevention and Public Health Fund, reducing access to immunizations and services that seek to prevent cancer, diabetes, heart disease, to name a few.
The President has already said he would veto this attempt to pit health care against education--health care, which benefits all, but particularly benefits those low-income and middle-income American families and, of course, these education programs that are a lifeline and a mainstay for middle-income Americans.
The other aspect of attacking this prevention fund is, in the long term, if we are ever going to get our hands around the cost of health care in this country--and both sides recognize this is one of the critical obstacles we face in the future--we have to have better prevention. It is difficult to understand how people can say: Let's not do prevention, but we have to cut health care costs. If we could have an effective prevention program, we could, indeed, over years, and with increasing success, reduce or at least begin to flatten that proverbial health care cost curve.
It is interesting to note, the other side is proposing to use health care to pay for this proposal to help middle-income families, but they do not always insist on paying for everything they want to do. They will, frankly--and, I think, eagerly--extend the Bush tax cuts without any pay-for. The House recently passed the so-called Small Business Tax Cut Act with no offsets. And that costs $46 billion--nearly enough to pay for the student loan interest rate at 3.4 percent permanently.
Following this logic, students and their families across the country are probably wondering: Well, why isn't the risk of doubling their interest rate treated the same way as benefiting the wealthiest Americans through tax cuts and businesses through tax cuts? Don't they count as much? Shouldn't they count as much?
We propose to pay for this 1-year extension by closing an egregious loophole in the Tax Code that has enabled certain high-wage earners to avoid paying their fair share into Social Security and Medicare by misclassifying their wages as profits through subchapter S corporations. It is a very small subset of corporations that are doing this, and our proposal is targeted.
This is not the small manufacturing plant that is organized as a subchapter S corporation or the pharmacy or the lumber dealer. These are consultants, these are high-paid attorneys, these are professionals who have chosen to put between themselves and their company or their partnership in another entity purely for the purpose of minimizing their payroll tax exposure. That is a loophole that should be cut regardless of other measures we are considering.
Essentially, this is a very small group of people, as I said. In order to be subject to this proposal, you would have to have 75 percent or more of your gross revenues from professional services. This does not apply to the manufacturer or the merchant. It is lawyers, accountants, lobbyists, and similarly positioned individuals. And it is further restricted to only those who earn more than $250,000 filing jointly. So this is not the struggling underpaid professional. These are people who are doing reasonably well in this very complicated and competitive society.
According to the Joint Committee on Taxation, in 2009 about 15 percent of all S corporations were service businesses as defined in this bill. Yet this small subset is responsible for billions of dollars in lost revenue to Medicare and Social Security.
In a 2009 report, the Government Accountability Office found that in the 2003 and 2004 tax years, individuals used this loophole to underreport over $23 billion in wage income.
This is a loophole that should be closed. I hope my colleagues on the other side of the aisle will take a serious look at it and join us in supporting this bill.
We have 54 days to prevent the interest rate from doubling on subsidized student loans. We have no time to waste.
Mr. President, with that, I yield the floor.
