May 31 (Bloomberg) -- Republican congressional leaders, seeking to end a partisan impasse over how to pay for freezing student-loan interest rates for a year, are offering alternative financing plans.
Unless Congress acts by July 1, the interest rate for college students’ Stafford loans will double from 3.4 percent to 6.8 percent. Republicans and Democrats disagree on how to fund the $6 billion cost.
A House-passed bill would take the money from a preventive-care fund created by the 2010 federal health-care overhaul. Senate Republicans blocked consideration of Democratic legislation to force owners of some small businesses to pay withholding taxes to finance the subsidy.
In a letter to President Barack Obama, Republican leaders proposed various methods to pay for the freeze, including higher pension contributions by federal workers and a plan to prevent overpaying Social Security benefits to retired state and municipal workers who get pensions.
“Our alternative is reasonable and responsible, but in the interest of finding common ground on a way to pay for a one-year extension of the current student loan interest rate, we are open to other solutions that we have all supported in the past,” House Speaker John Boehner, Senate Minority Leader Mitch McConnell and other Republican leaders said in their letter to Obama.
Republican leaders released the letter after Politico.com reported that Boehner told a closed meeting of House Republicans it is unlikely that Congress will resolve the impasse before interest rate increase on July 1.
Democrats seized on the report, accusing Republicans of indifference to the plight of financially strapped students. Charles Schumer of New York, the third-ranking Senate Democrat, said in a statement that the report confirms “our suspicions that Republicans were never serious about wanting to stop rates from doubling on college students.”
Michael Steel, a spokesman for Boehner, said the speaker told Republican colleagues that House leaders “are waiting for Senate Democrats” to act on the House-passed measure. The speaker also told fellow Republicans that “if the interest rate lapses because of the Democrats’ inaction, we can fix it retroactively,” Steel said.
The leaders’ letter to Obama, dated today, was written before the House Republican conference, Steel said.
Under the program, students borrow each year at the prevailing interest rate set by law. Students who attend a four-year college don’t have to start paying interest on the loans until two years after graduation.
One option proposed by Republican leaders, taken from Obama’s 2013 budget plan, would require students who drop out to begin paying interest immediately.
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