Senate Dems. Counter GOP Student Loan Interest Rate Proposals

Senate Majority Leader Harry Reid (D-NV) sent a letter to House Speaker John Boehner (R-OH) and Senate Minority Leader Mitch McConnell (R-KY) to offer a proposal to pay for a one-year extension of student loan rates to prevent them from doubling on July 1.

Reid's proposal would reduce business tax deductions for pension contributions and increase premiums paid by employers for the insurance provided by the Pension Benefit Guaranty Corporation (PBGC) to cover the cost of extending the 3.4 percent interest rate on subsidized Stafford loans. 

The pension proposal was included in transportation legislation that garnered Republican support in the Senate, but hasn't been passed in the House.

"I suggest that we use part of these offsets to pay for the student loan legislation, and pass that measure immediately so that middle class families will not see their interest rates double on July 1st," Reid wrote in the letter. "The remainder of these offsets will still be available to finish completion of the transportation jobs bill once the conference committee completes its work."

Reid's proposal comes on the heels of two proposals House and Senate Republican leaders sent to the White House. In a letter to Obama, Republicans offered two new proposals to cover the $6 billion cost of extending the 3.4% interest rate for another year.

The first proposal would increase the amount federal employees contribute to their retirements.

The second proposal would:

  1. Limit the in-school interest subsidy to 150 percent of program length (President Obama proposed this in his FY 13 budget request)
  2. Revise Medicaid provider tax threshold
  3. Improve collection of pension information from states and localities


Publication Date: 6/8/2012

Thomas R | 6/8/2012 8:54:52 AM

The current student loan interest rate "crisis" stems directly from the 2006 Democratic campaign promise to cut rates in half. The limited application of stair-stepping the interest rate reduction over a multi-year period with no continuation once the goal was accomplished was shortsighted, accomplishing little more than making a platform for claiming the promise was fulfilled. It artificially created this stir and a one year fix just moves the issue out of an election year where it will allow opportunity to disipate concerns away from a time of voting. The only individuals truly served by this are politicians. A long term solution is necessary and it should be made this year with integrity and honesty.

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