Tuesday, June 26, 2012 | 4:45 p.m.
Democrats and Republicans in the Senate are within striking distance of producing a student loan bill that would keep interest rates frozen at 3.4 percent — but still aren’t saying how they plan to bring it to the floor.
There’s only a few days left to pass a measure that would keep the student loan repayment interest rate from doubling, to 6.8 percent, as it’s scheduled to on July 1.
Compromise had eluded Democrats and Republicans through several months, several proposals and several votes, most of which took place in the Senate.
The hang-up came over how to offset the $6 billion cost to the government of extending the lower interest rate. Senators considered everything from axing preventative health care funding to closing the tax loophole allowing S-corps with only a few shareholders to avoid paying income taxes.
The final compromise draws on two other proposals that were presented in letters congressional leaders exchanged over the last several weeks, but never voted on: a time limit to how many years students may be eligible for federally-subsidized loans, and changes to how business owners calculate pensions payments and how much they’re obliged to pay for pension insurance.
Lawmakers plan to increase pension insurance premiums enough to pull in about a half billion dollars overall, and believe the pension recalculation will reduce the number of tax deductions corporations take by about $5 billion per year. The limits on loan eligibility — six years for students pursuing a four-year degree, and three years for students pursuing a two-year degree — are expected to save the government about $1.2 billion.
The loan eligibility limit was a Republican proposal drawing on elements President Barack Obama proposed as part of his fiscal 2013 budget; the changes to pensions were Sen. Harry Reid’s idea.
“We think we're in a good place on student loans,” Reid told reporters Tuesday afternoon.
“Sen. Reid and I have an understanding that we think will be acceptable to the House,” Republican Leader Mitch McConnell said, adding that Obama had been “largely uninvolved” in the compromise.
But McConnell also indicated that there’s the potential the student loans bill could be held up, as its fate may be wrapped up in that of a much trickier piece of legislation: The highway bill, which has to emerge from committee negotiations by tomorrow if it’s going to pass by its end of the month deadline.
The compromise student loan bill “may or may not be coupled with the highway proposal over in the House,” McConnell said. “That, to my knowledge, is not yet resolved ... but those two could end up together.”
Reid expressed some doubts about that.
“That's a fair question, but I don't think we have to worry about that now,” he told reporters Tuesday afternoon. “The point is, we basically have the student loan issue worked out ... the next question is, what do we put it on to make sure we can complete it?”
Reid did express his confidence in the quality of the forthcoming transportation bill, if not the timing of its delivery.
“I'm convinced that when this is all over with, we could have a very, very good highway bill,” he said. “We have to have an agreement by tomorrow. Otherwise, we can't get the bill done. And we're very close to having everything done, but until we get everything done, nothing is done.”