In a rare act of election year bipartisanship, Republicans and Democrats reached an 11th hour compromise on student loan interest rates.
leaving President Barack Obama and the Democratic Party unable to continuing blame Congressional Republicans for obstructing a deal.
The compromise would keep student loan interest rates from doubling from 3.4 percent on Sunday to 6.8 percent. It does away with the core issue of funding the continued Stafford Loan subsidy by limiting federal subsidies for undergraduates to a maximum of six years to the tune of $1.2 billion.
Under another provision, expected to save $5 billion, companies would change how they set aside money for pension programs, making their annual contributions lower and less variable, in effect reducing their tax deductions.
An additional $500 million would come from pegging to inflation the fees companies pay to federally insure their pensions.
Both sides had been deadlocked up to this point, but the prospect of bad headlines proved enough for congressional leaders on both sides of the aisle to reach a deal. The deal came as a result of a bargain between Senate Majority Leader Harry Reid (D-Nev.) and Senate Minority Leader Mitch McConnell (R-Ky.). Sources close to Speaker John Boehner say he was aware of the deal, but was not involved.
Boehner and Senate Minority Leader Mitch McConnell (R-Ken.) have their work cut out for them persuading enough Republicans in both chambers to vote for the extension, which Reid said he thought had a 50-50 chance of passing. Much of the resistance to extending the 3.4 percent rate has come from Republicans who are concerned about the bill’s price tag and believe that the individuals who took out the loans, not the taxpayers, should be responsible for covering the cost of their education.
The major sticking point with both parties is how to offset the costs of the $6 billion cost to keep rates low. Also, in typical turn of Congressional events, the student loan interest rate cuts have been tied to a controversial transportation bill.
Of the $6 billion, approximately $5 billion would come from “pension-related proposals,” according to Newsday. These are the fees corporations pay toward employees’ retirement plans.
In order to make up the remaining funds, Democrats agreed to a Republicans proposal to limit the interest-free period on student loans to six years for a traditional four-year degree for undergraduates and three years for a two-year degree.
There are currently no interest charges for students who are still in school.
