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Senate Student Loan Deal in Reach

Tom Williams/CQ Roll Call

Lawmakers are close to reaching a deal on legislation that would prevent the interest rates on government-backed student loans from doubling July 1.

“I think both sides are comfortable that we’ll have something well ahead of next week’s deadline,” a Senate Democratic aide said.

It appears that the deal is being negotiated between Senate Democrats and Senate Republicans. House Republican leaders are being kept abreast of the talks but have not been involved, according to a House GOP aide.

On Thursday, Senate Majority Leader Harry Reid (D-Nev.) expressed optimism that a deal could be reached and acknowledged that discussions were under way.

The agreement is expected to include an offset for the $6 billion measure that Reid offered earlier this month.

One offset would change the way employers calculate their pension liabilities.

“This more flexible approach would narrow fluctuations in computing pension contributions and result in businesses taking fewer tax deductions for contributions,” Reid said in a June 7 letter to Speaker John Boehner (R-Ohio) and Senate Minority Leader Mitch McConnell (R-Ky.).

A similar provision was included in the transportation bill that the Senate passed 74-22 in March.

The second offset would boost Pension Benefit Guarantee Corp. premiums, a proposal that was also included in President Barack Obama budget proposal.

Reid’s letter followed a letter to Obama from Republicans suggesting offsets to the bill.

The GOP offered two options to Democrats. The first, which Democrats said would be unacceptable, would offset the costs of the student loan bill with an increase to federal employee retirement contributions by 1.2 percent over three years.

The second option was a combination of three pay-fors: limiting the duration of borrowers’ in-school interest subsidy for Stafford loans, revising the Medicaid provider tax threshold and improving state and local pension collection information.

While the two sides have committed to avoiding the interest rate increase, they have been at odds over how to pay for continuing the current law. Currently the rates are set at 3.4 percent but would spring to 6.8 percent beginning next month.

The Senate in May twice voted down a Democratic proposal that would cover the $6 billion cost of preventing the interest rate increase by eliminating a corporate tax loophole that allows wealthy individuals to pay less in Social Security and Medicare taxes. The chamber also rejected a GOP proposal.

The House passed a bill that would take the funds from a preventive care fund created by the Democratic-authored 2010 health care reform law.

But Democrats maintain there is no more room to cut in the preventive fund, which they argue will help save money by helping treating illnesses before they become chronic and expensive. Democrats also contend that the Republican offset is an effort to further their goal of repealing the health care law, which Democrats pushed through Congress.

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