Bloomberg News

McConnell Says Student Loans May Be Added to Highway Bill

June 26, 2012

The Senate’s top Republican said lawmakers are considering combining a transportation measure with a one-year freeze in student loan interest rates.

“Those two could end up together,” Senate Minority Leader Mitch McConnell, a Kentucky Republican, told reporters today. “Both need to be dealt with this week.”

Senator Jon Kyl of Arizona, the Senate’s No. 2 Republican, said earlier today in an interview that a deal on a combination measure may come as soon as today, although he and other lawmakers wouldn’t disclose how the $5.9 billion cost of the one-year rate freeze would be covered.

Unless Congress acts, student loan interest rates will double to 6.8 percent on July 1. Current funding for highway programs expires at the end of June.

Republicans and Democrats want to freeze rates for a year. The question has been how to cover the cost, and Senate Majority Leader Harry Reid, a Nevada Democrat, said today that a tentative agreement had been reached on that front.

“There’s a general feeling that we’ve worked out a compromise on that that’s acceptable,” Reid said without offering details.

Combined Measure

A deal on a combined student loan and highway measure may hinge on lawmakers reaching agreement on a multiyear highway bill. Highway programs have been operating on a series of short- term extensions, and lawmakers have said they would consider another extension as a last resort to prevent highway programs from lapsing.

“Until we get everything done, nothing’s done,” Reid told reporters today following a closed-door caucus lunch, adding that “over the last 24 hours, a lot of progress has been made.”

There are three possible budgetary offsets for a highway and student loan bill, said a Senate Republican aide, who requested anonymity to discuss the still-forming agreement.

They are higher fees payable to the Pension Benefit Guaranty Corporation, changes to corporate pension funding requirements to reduce payments and increase taxable income, and changes to a government subsidy of student loan interest to borrowers who are still in school.

Previously Discussed

All of those items have been previously discussed by lawmakers working on the two measures.

Reid said today the odds were “better than 50-50” that lawmakers would avoid another short-term highway extension. He told reporters a deal was needed by tomorrow to give lawmakers enough time to meet their end-of-the-month deadline.

In the House, Minority Whip Steny Hoyer, a Maryland Democrat, told reporters that negotiators were “very close to an understanding on student loans” and may vote June 29 on that proposal and on a highway measure.

To contact the reporters on this story: Kathleen Hunter in Washington at khunter9@bloomberg.net; Richard Rubin in Washington at rrubin12@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net


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