Top senators from both parties are closing in on an agreement to prevent student loan rates from doubling on July 1 — even as President Barack Obama and Senate Minority Leader Mitch McConnell engaged in another round of partisan brinkmanship Thursday over the issue.
Senate Majority Leader Harry Reid (D-Nev.) and McConnell have taken charge of the negotiations and a deal could be announced as soon as Friday, sources say, although early next week seems more likely.
“I think we’re close; I think we’re very close to an agreement,” Sen. Dick Durbin (D-Ill.) told POLITICO on Thursday. “It will be a compromise on both sides.”
The talks have centered on how to pay the roughly $6 billion it will cost to keep the interest rate on federal Stafford loans at 3.4 percent. Unless Congress intervenes, rates would increase to 6.8 percent starting in July.
The list of options Reid and McConnell are considering include one favored by Reid that would tweak pension payment contributions by employers and increase premiums paid by businesses for Pension Benefit Guaranty Corp. coverage.
The leaders also are discussing ideas that House and Senate GOP leaders offered to the White House. Those proposals include a 0.4 percent increase in federal employee retirement contributions over the next three years, or a combination of offsets that would reduce overpayments to Social Security recipients, revise certain Medicaid taxes and stop subsidizing the interest that accumulated on certain student loans.
Durbin said the leaders are considering other ways as well to pay for the interest rate extension, but he declined to give details. And Sen. Tom Harkin (D-Iowa) said the remaining hangup was with the Congressional Budget Office over the provisions that would pay for the $6 billion cost.
“Hopefully, some stuff will happen by tonight or by tomorrow,” said Harkin, who is chairman of the Senate Health, Education, Labor, and Pensions Committee. “They are working on it today, and I know my staff is involved. Hopefully, by tomorrow, we’ll have a clear path.”
“There’s been a lot of work on all of that,” Sen. Jon Kyl (R-Ariz.) said Thursday of the offsets. “I’m not involved in it, I can’t promise, … but they’re making progress.”
Reid told reporters Thursday that he has held several meetings over the past two days on resolving the student loan impasse. While “we’re not there,” he said, “we’re well down the road.”
And a senior Republican aide said both sides have exchanged proposals and “we’ve been ready to get this done for weeks.” The House will evaluate it once the Senate reaches a deal, a spokesman for Speaker John Boehner (R-Ohio) said.
“At this stage, it appears that they are compromising, just as we are,” Reid said Thursday of McConnell and Boehner. “And I hope we can get something done.”
Congressional Democrats and Republicans broadly agree that the current 3.4 percent interest rates on loans should be extended for one year, but they have clashed over how to pay for the package. House Republicans, backed by a handful of Democrats, passed an extension of the student loan interest rate that was paid for by shifting money from a health care prevention fund. But that was a nonstarter with the Democratic-led Senate, and the White House responded with a veto threat.
Then, the Senate tried to pass an extension that was funded by closing a tax loophole used by Subchapter S Corporations to avoid paying a Medicare tax, but Republicans scoffed at the measure and blocked it, calling it a tax increase on businesses.
Meanwhile, Obama in recent months has traveled to campuses in swing states such as Iowa and North Carolina to talk up the need to keep loan rates low, while shaking his finger at Congress for dragging its feet. His administration launched another public relations offensive Thursday, as Obama spoke to college students at the White House and the Treasury and Education departments released a report that outlined the economic benefits of higher education.
“If Congress does not get this done in a week, the average student with federal student loans will rack up an additional $1,000 in debt over the coming year,” Obama said Thursday. “If Congress fails to act, more than 7 million students will suddenly be hit with the equivalent of a $1,000 tax hike. And that’s not something that you can afford right now.”
That was a bit of hyperbole. According to the Department of Education, if rates double, the borrower paying back the average Stafford loan would owe an additional $1,041 over the 12-year life of the loan. That would break down to $87 more annually, or about $7 more a month.
Congressional Republicans have fumed at Obama for blaming Congress over the impasse, and aides to McConnell and Boehner said the White House has not contacted them to negotiate. White House press secretary Jay Carney insisted Thursday that the administration was talking with congressional officials, though he declined to say who they were.
“It’s totally political theater,” Kyl said of Obama’s comments. “It doesn’t help.”
McConnell, who has delivered no fewer than seven floor speeches since early May, criticizing Obama and congressional Democrats on the student loan issue, took to the floor again Thursday to slam the president for what the Kentucky Republican called “another sad example of his election-year strategy of deflection and distraction.”
“The only reason this issue isn’t already resolved — the only reason — is that the president wants to keep it alive,” McConnell said on the Senate floor Thursday. “He thinks it benefits him politically for college students to believe we’re the problem.”
Asked about the negotiations as he entered the Senate chamber, McConnell refused to say a word Thursday. But Reid, his counterpart, was optimistic.
“I know this is very unlike us,” Reid said, but “we have great hope that we can get that done.”