Senate works out freeze for college-loan interest

— The Senate’s top Democrat and Republican have reached a deal that would prevent interest rates on college loans from doubling beginning this weekend for millions of students, they announced Tuesday.

However, House Speaker John Boehner, R-Ohio, has yet to decide whether the pact will be acceptable to his Republican-run chamber.

“We basically have the student-loan issue worked out,” said Senate Majority Leader Harry Reid, D-Nev.

Senate Minority Leader Mitch McConnell, R-Ky., told reporters separately that “Sen. Reid and I have an understanding that we think will be acceptable to the House.”

Under the agreement, if approved by Congress, interest rates for new subsidized Stafford loans would remain at 3.4 percent through June 30, 2013.

Without congressional action, interest rates on new loans would double to 6.8 percent beginning Sunday for 7.4 million students who the government estimates would get such loans over the next year.

The higher rate would cost the average student an extra $1,000 over the life of the loan, which typically takes more than a decade to repay.

About three-fourths of the bill’s $6 billion cost would come from Democratic proposals to boost the fees companies must pay to have their pensions insured by the quasi government Pension Benefit Guaranty Corp., and to change how companies compute the money they must set aside to fund their pensions. The change would make their contributions more consistent year to year - which business desires - and would result in fewer corporate tax deductions for those payments.

The remaining funds would come from a GOP plan to limit federal subsidies for Stafford loans for undergraduates to six years. Currently, the government charges no interest while students are still in school, even if it takes them longer than six years to graduate.

Asked whether Boehner would sign the agreement, spokesman Michael Steel said, “We’ll take a look.”

The pension money was also being discussed as way to finance an extension of federal transportation programs, which expire this weekend. Leaders were hoping agreement on both bills could be approved before Congress leaves town for its July 4 break at week’s end.

President Barack Obama spent part of this spring traveling to college campuses to underscore his effort to prevent the interest rates from rising. He was appealing to studentage voters who supported him strongly in the 2008 presidential election.

Hoping to pre-empt Obama from using student loans as an issue this fall, GOP presidential challenger Mitt Romney said in April that he supported extending the lower loan rates.

Congressional GOP leaders said they supported an extension as well, though some rank-and-file Republicans still oppose the idea, arguing it is too expensive and that financial markets should set the lending rates.

In recent weeks, the disagreement has been over how to pay for the extension.

Front Section, Pages 2 on 06/27/2012

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