WASHINGTON -- With a stalemate in Congress threatening a student loan interest rate increase, congressional Republicans proposed a new way to pay for keeping federally subsidized loan rates low in a counter-offer to the White House to break the standoff.
Democrats and Republicans say they want to avoid a rate increase on new undergraduate loans that is scheduled for July 1, but they have been at odds over how to pay the $6-billion cost.
The Republican leaders of the House and Senate suggested two new options in a letter Thursday to President Obama.
“There is no reason we cannot quickly and in a bipartisan manner enact fiscally responsible legislation,” wrote House Speaker John A. Boehner(R-Ohio), House Majority Leader Eric Cantor (R-Va.), Sen. Mitch McConnell of Kentucky, the Republican leader, and Sen. Jon Kyl of Arizona, the No. 2 Republican in the Senate.
The movement came after Democrats criticized House Republicans, who had essentially moved away from the issue after passing a bill to keep rates low. That legislation was rejected by Democrats in the Senate, and Obama threatened a veto because it would have gutted a public health and prevention fund to pay for the loan rate subsidy.
A resolution to the standoff was not included in a GOP memo of summer legislative priorities issued to members.
A spokesman for Rep. Nancy Pelosi (D-San Francisco), the House minority leader, called the counter-offer “a complete and utter ruse.”
“This letter is nothing but a damage-control effort to try to hide the disdain the House Republican leadership continues to show for the millions of American students who are struggling to afford to pay for college,” said Pelosi spokesman Drew Hammill.
Under the proposal, Republicans suggested raising the amount federal employees contribute toward their retirements, a proposal Obama had included in his budget for the coming fiscal year, but is unlikely to get broad support from Democrats, who have argued that government workers have already seen their benefits trimmed and pay frozen for the last several years.
Republicans also suggested a second option that would cut off the loan subsidy – and allow interest to start accruing – for students who attend college part-time or take longer to finish college. The second option would also adjust Medicaid payments to the states.
Democrats in the Senate had proposed paying for the loan costs by imposing a new tax on higher-income households that earn tax-free income from businesses that are organized as S corporations. But Republicans have opposed new taxes.
Interest rates on new student loans are set to double to 6.8% next month if Congress fails to act under legislation signed into law in 2007, hitting 7 million undergraduate with higher college costs.