WASHINGTON, D.C. -- The Senate’s top Democrat and Republican said Tuesday that they’ve reached a deal that would prevent interest rates on college loans from doubling beginning this weekend for millions of students. But House Speaker John Boehner, R-Ohio, has yet to decide whether the pact will be acceptable to his Republican-run chamber.
The agreement, if approved by Congress, would spell an end to one of this election-season’s higher profile conflicts between President Barack Obama and congressional Republicans. Even so, the battle has been a bitter one, with Republicans accusing the White House of dragging out the fight to score political points and Democrats accusing the GOP of blocking action on the issue.
“The president’s been largely uninvolved in that, but Senator Reid and I have an understanding that we think will be acceptable to the House,” Senate Minority Leader Mitch McConnell, R-Ky., told reporters.
“We basically have the student loan issue worked out,” Senate Majority Leader Harry Reid, D-Nev., said separately.
Under the agreement, interest rates for new subsidized Stafford loans would remain at 3.4 percent through next June 30.
Without congressional action, interest rates on the loans would double to 6.8 percent for new loans beginning July 1, this Sunday, for 7.4 million students the government estimates would get such loans over the next year.
That increase, should it occur, would not affect loans currently held by students. The higher rate would cost the average student an extra $1,000 over the life of the loan, which typically takes more than a decade to repay.
White House press secretary Jay Carney issued a statement expressing support for the agreement, adding, “We hope that Congress will complete the legislative process and send a bill to the president as soon as possible.”
About $5 billion of the measure’s $6 billion cost would come from Democratic pension-related proposals, including a change in how companies compute the money they must set aside to fund their pensions. The change would make their contributions more consistent year to year and in effect lower them—which business desires—and result in fewer corporate tax deductions for those payments.
In addition, fees that companies pay to have their pensions insured by the quasi-government Pension Benefit Guaranty Corp. would rise to reflect increases in inflation.
The remaining funds would come from a GOP plan to limit federal subsidies for Stafford loans for undergraduates to six years. Currently, the government charges no interest while students are still in school, even if it takes them longer than six years to graduate.
The financing was described by Senate Democratic and GOP aides who spoke on condition of anonymity to discuss details of the emerging agreement.
Asked if Boehner would sign off on the agreement, spokesman Michael Steel said, “We’ll take a look.”
The pension money was also being discussed as way to finance an extension of federal transportation programs, which expire this weekend. Leaders were hoping agreement on both bills could be approved before Congress leaves town for its July 4 break at week’s end.
Obama spent part of this spring traveling to college campuses to underscore his effort to prevent the interest rates from rising. In so doing, he was appealing to student-age voters who supported him strongly in the 2008 presidential election.
Hoping to pre-empt Obama from using student loans as an issue this fall, GOP presidential challenger Mitt Romney said in April that he supported extending the lower loan rates. Congressional GOP leaders said they supported an extension as well, though some rank-and-file Republicans still oppose the idea, arguing it is too expensive and that financial markets should set the lending rates.
In recent weeks, the disagreement was over how to pay for the extension.