Republicans offer new plans in student loan stalemate

By Karoun Demirjian

Friday, June 1, 2012 | 2 a.m.

With just a month to go until the interest rate on student loans doubles, lawmakers are scrambling to find a way to offset the cost of keeping it in place.

On Thursday, Republicans threw two new suggestions into the mix: Make the federal government employees pay for it, or simply have the students finish school faster.

Republican leaders sent a letter to President Barack Obama detailing two proposals to offset the approximately $6 billion it’s going to cost the government to freeze student loan interest rates for the 2012-13 academic year.

Both proposals draw on bits and pieces of the president’s own budget proposal for fiscal 2013, riffing on them slightly, to make the case that the Republicans are trying to reach out in compromise — though Democrats charge they are doing just the opposite.

The first proposal suggests raising the contribution federal employees are required to make to their pension plans by 5 percent. The Obama administration has suggested raising the same contributions by just 0.4 percent per year for the next three years.

The second seeks to put a time limit on students’ eligibility for federal loans, capping their window of subsidized borrowing to 150 percent of the time it should take to complete a degree: So students can’t take more than 6 years to finish a four-year degree, or more than three years to finish a two-year associate’s degree.

That was actually in the president’s budget proposal — and doesn’t save that much (only about half a billion, according to Republicans). So they round out that proposal by suggesting they lower the threshold for which Medicare providers don’t have to count the taxes they pay against their eligibility to receive provider payments earlier than the president had planned to.

The proposals are actually the third to come from Republicans, who previously hoped to offset the cost of the interest rate freeze by axing a preventative care fund designed under the health care law.

But that balancing act — as well as a proposal from Democrats to pay for the interest rate freeze by raising the effective tax rate on hedge fund owners and other small-group S-corp filers — died in the Senate last week.

The White House did not respond to the Republicans’ new suggestions Thursday.

Lawmakers on both sides of the aisle have said emphatically that despite the steep price tag, the alternative — $1,000 a year of added loan obligation for the average student borrower — is too awful to contemplate not passing legislation to freeze the interest rate. But earlier on Thursday, House Speaker John Boehner told his conference it wasn’t likely they’d resolve this standoff before rates went up, according to various reports.

Leading Democrats have been quick to take that prediction as an indication of his unwillingness to compromise.

“Today, Speaker Boehner confirmed to his conference what was already obvious: Republicans are not interested in working with Democrats to find a responsible path that would prevent the doubling of interest rates on America’s students,” House Democratic Leader Nancy Pelosi said in a statement. “Republicans have continued to make it clear that they were never interested in helping students in the first place.”

Republicans, however, are poised to start charging Democratic hypocrisy if they don’t agree.

“The policies in both options are either policies that you recommended in their entirety or a subset of policy you recommended,” Republican leaders wrote in their letter to the president. “There is no reason we cannot quickly and in a bipartisan manner to enact fiscally responsible legislation.”