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Federal student loan battles follow state battles

Alaskans hope federal effort to reduce loan rates will be more successful than state's try

Posted: May 9, 2012 - 11:07pm

The U.S. Senate has stalled on adopting legislation on student loan interest rates, mirroring a similar partisan divide in the Alaska Legislature.

Alaska Rep. Les Gara, D-Anchorage, said both governments need to do more to make education more affordable.

“The second most crushing debt people have, behind their mortgage, is their student loan debt,” Gara said.

He questioned why used car loans are being offered for 3 percent, while Alaska student loans were between 6-7 percent.

In the U.S. Senate, the “Stop the Student Loan Interest Rate Hike of 2012 Act” failed to move from the Senate this week as Democrats and Republicans differed on how to pay for it.

Without the bill, some federally subsidized Federal Direct Stafford Loans will double their interest rates from 3.4 percent to 6.8 percent.

Sen. Mark Begich, D-Alaska, a former chairman of the Alaska Student Loan Corp., said the failure of the federal government would double rates for 7 million college students in the coming year.

Begich’s Republican counterpart, Sen. Lisa Murkowski, voted against the bill saying it would raise taxes on small businesses, and make it less likely new graduates would be able to find jobs.

She said the bill “tries to solve one problem by making another worse. Raising taxes on prospective employers will only decrease the chances that they’ll be able to add jobs and hire young college graduates.”

Begich, in his statement, disputed that.

“As a small business owner, I want Alaskans to know that the claim this bill raises taxes on small businesses is a red herring, designed to confuse the public,” he said.

“This is about closing loopholes that currently allow some lobbyists, consultants and lawyers to skirt the law and avoid paying Social Security and Medicare taxes — which every other hard-working small business owner pays.”

Gara’s bill in the Alaska Legislature was designed to reduce student loan borrowing costs for those who stay in Alaska or return following graduation.

He said House Bill 272 interest rate reduction “helps end the brain drain” of students who leave Alaska by making it more financially advantageous to return. Rep. Beth Kerttula, D-Juneau, was also a sponsor.

Chairman Alan Dick, R-Stony River, held Gara’s bill in the House Education Committee despite its being re-written twice to address concerns from Dick and the Alaska Student Loan Corp.

• Contact reporter Pat Forgey at 523-2250 or at patrick.forgey@juneauempire.com.

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