U.S. House Republicans propose new student loan rate ideas

WASHINGTON (Reuters) - Republican congressional leaders, seeking to end a standoff over maintaining low interest rates on federal student loans, on Thursday offered President Barack Obama two new options to cover the $6 billion cost of a one-year extension.

But it appeared doubtful that either proposal would win the needed support before a July 1 deadline when the interest rate is set to double to 6.8 percent for 7.4 million students.

Republicans said it may not be resolved until after July 1, but that a retroactive agreement could then be approved.

Senate Democrats reiterated that they would seek a compromise as members of both parties again accused each other of bargaining in bad faith.

With Democrats and Republicans having rejected earlier funding proposals, Republican leaders wrote to Obama to suggest new ways to find common ground.

One option would pay for an extension of the 3.4 percent interest rate by cutting federal workers' retirement benefits.

The second option would cover the cost by improving information collection to guard against Social Security overpayments, change tax provisions related to the Medicaid healthcare program and shorten the time that student loans can be interest free.

"There is no reason we cannot quickly and in a bipartisan manner enact fiscally responsible legislation," Republican leaders wrote.

The letter was signed by House Speaker John Boehner, House Republican Leader Eric Cantor, Senate Republican Leader Mitch McConnell and assistant Senate Republican leader Jon Kyl.

A senior Democratic aide said it is "tough to take seriously" the proposals given that Boehner had reportedly said earlier that an agreement was unlikely to be reached.

Politico reported that Boehner told a closed-door meeting of House Republicans it was doubtful that Congress would be able to prevent a doubling of the interest rate before the end of June, and blamed the Democratic-led Senate.

A senior Republican aide said the speaker told colleagues that if no deal is reached by July 1, the problem could be fixed retroactively.

Boehner also said that Obama wants to "fabricate fights on things like student loans" because he is "out of ideas" and doesn't want to talk about "his failed policies," the aide said.

Senator Charles Schumer, a member of Democratic leadership, ripped into Boehner based on the report by Politico.

"These overheard comments by Speaker Boehner confirm our suspicions that Republicans were never serious about wanting to stop rates from doubling on college students," Schumer said.

"In the Senate, we are going to persist in finding a compromise," Schumer said.

The Republican-led House passed a bill last month to pay for a renewal of the lower interest rate by taking money from Obama's healthcare overhaul.

Senate Democrats rejected the bill, preferring instead to cover the cost by plugging a tax loophole for the rich. Republicans have called the Democratic approach a non-starter.

(Reporting by Thomas Ferraro; editing by Christopher Wilson)