Senate Majority Leader Harry Reid on Thursday sought to defuse a partisan standoff over how to prevent student loan interest rates from doubling next month for 7.4 million students.
In a letter to Republican leaders, Reid, D-Nev., proposed extending current interest rates for the next year and paying the effort's $6 billion cost with a combination of savings. His offer, coupled with a recalibrated recent offer from Senate Republicans, raised hopes of a deal that could hold off rising loan rates.
In one of Reid's proposals, which would raise about $8 billion, employers would be charged higher insurance premiums for pensions that are underfunded. Another Reid proposal could raise almost $10 billion by easing pension funding rules for businesses so that companies would take fewer tax deductions for pension contributions. Whatever's left over after the student loan extension passes would be used for transportation programs mired in House-Senate negotiations, Reid proposed.
"The combination of these two proposals will provide sufficient resources to fund both," Reid said in his letter to House Speaker John Boehner and Senate Majority Leader Mitch McConnell.
The Republican leaders made their own offer last week.
Taken together, the Republican and Democratic offers suggest both sides are feeling election-year pressure to strike a rare compromise before a June 30 deadline. If Congress does not act, interest rates on new loans would double July 1 from 3.4 percent to 6.8 percent.
The issue resonates with young voters, a group that supported President Barack Obama in 2008 and is critical to his hopes for a second term. As the debate raged in Washington, Obama campaigned on the issue at the University of Nevada, Las Vegas.
In making Thursday's offer, Reid is dropping a previous proposal--hotly opposed by Republicans--to pay for the interest rate extension by raising Social Security and Medicare payroll taxes on high-earning owners of some privately held companies and professional practices.
Reid's move came a week after Republicans dropped their own proposal to pay for the student loan extension by abolishing a preventive health program established by Obama's health care measure.
Instead, Republicans made a new offer last week in a letter to Obama modeled on savings the president himself included in his budget this year. They suggested that payment plan would be to gradually increase the amount that federal workers contribute to their pensions by 1.2 percent over the next three years.
The GOP side also suggested a combination of three other ideas, including limiting the taxes most states impose on hospitals and other providers to qualify for higher federal Medicaid payments. Another proposal would limit to six years the time during which students in four-year undergraduate programs could receive federal subsidies on Stafford loans.
Republicans also proposed requiring state and local pension officials to report more information about their civil servants to Washington so federal officials could better identify Social Security fraud.
As Obama made his case to college-age voters in Nevada, McConnell complained back in Washington that the president was making more effort to score political points from the standoff than to resolve it.
"All the president has to do is just pick up his mail, choose one of the bipartisan proposals we laid out in our letter, proposals he's already shown he supports and then announce to the students that the problems' been solved," McConnell said on the Senate floor.