US Senate blocks student loan bill

WASHINGTON - The US Senate Republicans and Democrats failed to reach a compromise on Tuesday on a White House- backed bill to extend low interest rates for college student loans, amid a congressional battle in the election year.

In a 52-45 vote, Republican Senators blocked the Democrat- sponsored bill although both sides agreed that the measure should be passed. Barring the extension, the interest rates on new federally subsidized student loans will increase from 3.4 percent, a temporary rate reduction that was enacted in 2007, to 6.8 percent since July 1.

The White House said the result out of "old political battles" were "extremely disappointing" in a statement following the vote. It said that "Republicans in the Senate today voted to ask millions of students to pay an average of $1,000 each in order to protect a loophole that allows millionaires to dodge payroll taxes."

Senate Republicans object to the way the Democratic bill proposes to pay for the extension, which requires the private sector to pay higher payroll taxes for Social Security and Medicare. They argue that the proposal would undermine efforts to create jobs and stimulate economy.

The Education Department estimates 7.4 million students will borrow such loans in the year beginning July 1, averaging $4,226?for each student.

A report released by the non-profit College Board last October showed tuition and fees at US public universities and colleges have increased more than 8 percent in the 2011-2012 academic year as a weakened economy and severe cuts in state funding took their toll.