Reid floats offer to break impasse on student loan rates

Senate Majority Leader Harry Reid (D-Nev.) made a new offer to Republicans Thursday to break an impasse over legislation to prevent interest rates on student loans from doubling.

Reid, in a letter to GOP leaders on Thursday, forwarded on a pair of pension-related proposals that he said could cover the roughly $6 billion cost of extending the current loan rates for a year, at 3.4 percent, and also help finance surface transportation programs. 

The loan rates will double to 6.8 percent in July without a deal, raising costs for more than 7 million students. 

Reid’s proposal would force some employers to pay higher insurance premiums on pensions, and also change how employers calculate their pension contributions, in a way the majority leader says will lead to companies taking fewer tax deductions.  
The change to how pension contributions are computed expands on a provision that was included in the Senate transportation bill, which passed with 74 votes. House and Senate negotiators are now trying to hammer out a compromise transportation bill before the end of the month. 

Reid also suggested that, if need be, Congress pass the student loan extension with his proposed pay-fors immediately, leaving the leftover funds for whenever the transportation conference committee finishes its work. 

The offer comes after top Democrats and Republicans had accused one another of politicizing the issue. President Obama on Thursday visited the University of Nevada Las Vegas, where he delivered a speech pressing Congress for action.

House Republicans have complained that the White House has ignored a proposal from GOP congressional leaders that would pay for the cost of the student loan legislation with savings included in the most recent White House budget. 

Reid cast his plan as a counter-proposal to the GOP's offering. 

“In that spirit, I want to offer another bipartisan proposal that recently passed the Senate with strong support from Republicans,” Reid wrote to House Speaker John Boehner (R-Ohio) and Senate Minority Leader Mitch McConnell (R-Ky.).

A McConnell spokesman suggested Reid’s offer might represent a step forward in the student loan debate, and that Republicans were pleasantly surprised that the majority leader’s most recent proposal didn’t include a tax increase.  

“We will review these new proposals and hope that they will finally review the bipartisan proposals we sent a week ago,” the spokesman, Don Stewart, said in a statement. “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.”

Michael Steel, a spokesman for Boehner, noted that, unlike the Senate, the House had already passed a measure to extend current rates. But the Speaker’s office also suggested it was leaving the ball in Senate Republicans’ court when it came to Reid’s newest offer.

“We look forward to the Senate considering Senator Reid's proposal — and if the Senate passes it, we will address it,” Steel said in a statement.

The GOP offer last week included a proposal to increase pension contributions for federal workers, something unpopular with Democrats. 

The offer also combined limits on how long students could get student loan subsidies, a proposal to cut down on Social Security fraud and controls on taxes states charge to Medicaid providers.

While the White House has yet to publicly respond to the proposals, a top Senate Democrat, Tom Harkin (Iowa), slammed the plans on Wednesday for taking from low-income families to pay for an extension in the loan rates.

The student loan bill the House GOP passed got rid of a public health prevention fund included in the Democratic healthcare law. Senate Democrats’ original proposal, which Republicans blocked, would have forced some wealthy taxpayers to pay higher payroll taxes.