WASHINGTON (AP) — Senate Majority Leader Harry Reid on Thursday sought to defuse a partisan standoff over how to prevent student loan interest rates from doubling next month for 7.4 million students.
In a letter to Republican leaders, Reid proposed extending current interest rates for the next year and paying the effort’s $6 billion cost with a combination of savings. His offer, coupled with a recalibrated recent offer from Senate Republicans, raised hopes of a deal that could hold off rising loan rates.
In one of Reid’s proposals, employers would be charged higher insurance premiums for pensions that are underfunded, a proposal that would raise about $8 billion. Another Reid proposal could raise almost $10 billion by easing pension funding rules for businesses that would result in companies taking fewer tax deductions for pension contributions. Whatever’s left over after the student loan extension passes would be used for transportation programs mired in House-Senate negotiations, Reid proposed.
“The combination of these two proposals will provide sufficient resources to fund both,” Reid said in his letter to House Speaker John Boehner and Senate Majority Leader Mitch McConnell.
The Republicans, who made their own offer last week, didn’t immediately respond. But a spokesman for McConnell said it appears that talks are making progress.
Taken together, the Republican and Democratic offers suggest both sides are feeling election-year pressure to strike a rare compromise before a June 30 deadline. If Congress does not act, interest rates on new loans would double July 1 from 3.4 percent to 6.8 percent
In making Thursday’s offer, Reid is dropping a previous proposal opposed by Republicans to raise Social Security and Medicare payroll taxes on high-earning owners of some privately held companies and professional practices.
Reid’s move came a week after Republicans dropped a plan to use savings from abolishing a preventive health program established under President Barack Obama’s health care measure.
The Republican proposals last week, made in a letter to Obama, are modeled on savings the president himself included in his budget this year. They suggested that one way of paying to extend student loan interest rates would be to gradually increase the amount that federal workers contribute to their pensions by 1.2 percent over the next three years.
The GOP side also suggested a combination of three other ideas, including limiting the taxes most states impose on hospitals and other providers to qualify for higher federal Medicaid payments. Another proposal would limit to six years the time during which students in four-year undergraduate programs could receive federal subsidies on Stafford loans.
Republicans also proposed requiring state and local pension officials to report more information about their civil servants to Washington so federal officials could better identify Social Security fraud.