WASHINGTON/LAS VEGAS (Reuters) - Senate Democratic leader Harry Reid on Thursday offered a new way to avert by the end of this month a doubling of the 3.4 percent interest rate on federal student loans.
A Senate Republican leadership aide said the proposal would be reviewed and that it may represent progress toward ending an election-year standoff that has seen each side accuse the other of bargaining in bad faith.
President Barack Obama, speaking to about 2,500 people at the University of Nevada Las Vegas, encouraged lawmakers to come to an agreement, saying, “So I just said to Congress, get this done ... This is not complicated.”
Unless a bipartisan agreement is reached, the interest rate on federal student loans is set to double on July 1 to 6.8 percent. The White House says it would cost the average student about an additional $1,000 over the life of the loan.
In a letter to the top two Republicans in Congress, Reid suggested that proposed changes in private pension plans be used to cover the $6 billion cost of extending for one year the low interest rate on federal loans for 7.4 million students.
Reid said one of his proposed changes was recently agreed to as part of a bipartisan transportation bill approved by the Senate, 74-22. It would narrow fluctuations in computing pension contributions and result in fewer business tax deductions.
In addition, Reid cited bipartisan support for increasing premiums paid by employers for insurance provided by the federal Pension Benefit Guaranty Corp.
Reid said higher premiums could help pay for a renewal of the low-interest rate as well as offsets in the $109 billion Senate transportation bill now stalled in the House of Representatives.
“My preference would be to use the funds raised by these two proposals to pay for both measures, and pass them immediately,” Reid wrote House Speaker John Boehner and Senate Republican leader Mitch McConnell.
“However, if House Republicans are still not ready to pass the transportation jobs bill, I suggest that we use part of these offsets to pay for the student loan legislation,” Reid said.
Don Stewart, a McConnell spokesman, said, “We will review these new proposals” and expressed hope that Democrats would finally consider options offered two weeks ago by Republicans.
“But bottom line, now that Democrats are willing to take this issue seriously, and not just use students as props, we may be making progress,” Stewart said.
Michael Steel, a Boehner aide, said, “We look forward to the Senate considering Senator Reid’s proposal - and if the Senate passes it, we will address it.”
The Republican-led House and Democratic-led Senate have each passed competing proposals to fund an one-year renewal of the 3.4 percent rate, only to see the other chamber reject it.
Republicans have wanted to pay for it by taking money from Obama’s healthcare overhaul. Democrats have favored covering the cost by plugging tax loopholes for the rich.
On May 31, McConnell and Boehner offered new funding options of their own that included cutting federal retirement programs. Those ideas were brushed aside by Democrats.
Additional reporting by Laura MacInnis in Washington; Editing by Vicki Allen