Hill GOP leaders make new offer on student loans

House Speaker John Boehner of Ohio, accom­pa­nied by House Major­ity Leader Eric Can­tor of Va., left, and Rep. Kay Granger, R-Texas, meets with reporters Thurs­day fol­low­ing a GOP strat­egy ses­sion on Capi­tol Hill in Wash­ing­ton. (Asso­ci­ated Press | J. Scott Applewhite)

ALAN FRAM

Asso­ci­ated Press

WASHINGTON — Top con­gres­sional Repub­li­cans made a new offer to Pres­i­dent Barack Obama on Thurs­day in their fight over head­ing off a dou­bling of inter­est rates on fed­eral col­lege loans for 7.4 mil­lion stu­dents, propos­ing fresh ways to cover the effort’s $6 bil­lion cost.

The GOP ideas were mod­eled on sav­ings that Obama him­self had included in his bud­get for this year, sug­gest­ing that nego­ti­a­tions over end­ing the election-year impasse could take a seri­ous turn. Until now, both sides have favored extend­ing today’s 3.4 per­cent inter­est rates on sub­si­dized Stafford loans for another year but clashed over how to pay for it.

House Speaker John Boehner, Sen­ate Minor­ity Leader Mitch McConnell and other top Repub­li­cans made their pro­pos­als in a let­ter to Obama. They included sav­ings from mak­ing it harder for states to col­lect some fed­eral Med­ic­aid reimbursements.

“There is no rea­son we can­not quickly and in a bipar­ti­san man­ner enact fis­cally respon­si­ble leg­is­la­tion,” the let­ter said.

The lead­ers sent the let­ter on the same day that Boehner, R-Ohio, used a barn­yard vul­gar­ity in a meet­ing with GOP law­mak­ers to describe Democ­rats’ efforts to use issues like the stu­dent loan fight to dis­tract vot­ers from the country’s eco­nomic woes, said Boehner spokesman Michael Steel.

Accord­ing to Steel, Boehner told his col­leagues that it would be the Democratic-led Senate’s fault if Con­gress and the White House stale­mate and don’t act before July 1, the day inter­est rates would auto­mat­i­cally dou­ble to 6.8 per­cent. He also told them that even if there is a dead­lock that day, Con­gress could retroac­tively reduce the inter­est rates later, mak­ing July 1 a phony dead­line, said Steel.

The House approved a GOP-written bill pay­ing for the exten­sion by abol­ish­ing a pre­ven­tive health pro­gram, but that mea­sure has drawn a White House veto threat. Repub­li­cans derailed a Sen­ate Demo­c­ra­tic bill financ­ing the inter­est rate exten­sion by boost­ing pay­roll taxes on some high-earning own­ers of pri­vate companies.

White House spokesman Matt Lehrich drew a con­trast between Boehner’s effort to down­play the impor­tance of the loan issue with the let­ter sug­gest­ing the two sides work together, adding, “The pres­i­dent will work with mem­bers of both par­ties to pre­vent the inter­est rate from doubling.”

A 2007 law grad­u­ally reduced Stafford inter­est rates but let them bounce back to 6.8 per­cent this July 1 in a money-saving move.

Also Thurs­day, the Fed­eral Reserve Bank of New York said total stu­dent loan debt rose to $904 bil­lion in the first three months of this year, a $30 bil­lion increase that occurred even as over­all con­sumer debt has been declin­ing. Out­stand­ing stu­dent loans far out­weigh the $679 bil­lion owed on credit cards.

In their let­ter to Obama, Boehner and McConnell, R-Ky., sug­gested that one way of pay­ing to extend stu­dent loan inter­est rates would be to grad­u­ally increase the amount that fed­eral work­ers con­tribute to their pen­sions by 1.2 per­cent over the next three years. That sug­ges­tion, included in Obama’s bud­get, has run into oppo­si­tion in the past from law­mak­ers from areas with many civil servants.

As another option, the GOP lead­ers sug­gested com­bin­ing three ideas.

The largest would limit the taxes most states impose on hos­pi­tals, nurs­ing homes and other providers that are used to qual­ify for higher fed­eral Med­ic­aid payments.

States can cur­rently impose taxes of up to 6 per­cent on providers, but under a House-approved pro­vi­sion that thresh­old would be reduced to 5.5 per­cent, in effect reduc­ing fed­eral Med­ic­aid reim­burse­ments to states. The admin­is­tra­tion has pro­posed reduc­ing the level to 3.5 percent.

The Repub­li­cans also pro­posed two other sav­ings embraced by Obama.

One would limit to six years the time dur­ing which stu­dents in four-year under­grad­u­ate pro­grams could receive fed­eral sub­si­dies on Stafford loans. Until now, stu­dents have not been charged inter­est on their Stafford loans while they were still study­ing, even if they were in school for longer than six years.

The sec­ond would require state and local pen­sion offi­cials to report more infor­ma­tion about their civil ser­vants to Wash­ing­ton so fed­eral offi­cials could bet­ter iden­tify whether any were receiv­ing Social Secu­rity ben­e­fits to which they are not entitled.

Posted by AP News on May 31 2012. You can follow any responses to this entry through the RSS Feed. Comments can be made below.