WASHINGTON (AP) - Congressional bargainers
appeared to be closing in on a compromise that would head off a July 1
doubling of interest rates on federal loans to 7.4 million college
students and end an election-year battle between President Barack Obama
and Congress.
Senate aides from both
parties said Friday the two sides were moving toward a deal on how to
pay the measure's $6 billion price tag, the chief source of partisan
conflict.
The goal is to push
legislation through Congress next week so the current 3.4 percent
interest rate on subsidized Stafford loans can be preserved for another
year. A 2007 law gradually reduced interest rates on the loans but
required them to balloon back to 6.8 percent this July 1 in a
cost-saving maneuver.
On another front, the two
sides were also close to an agreement to overhaul federal transportation
programs, according to House and Senate aides from both parties.
Negotiations were expected to continue through the weekend, with votes
expected next week on either a major transportation bill or an extension
of current programs, said the aides, who spoke on condition of
anonymity to discuss details of the talks.
Obama said Saturday in his weekly radio and Internet address there was "no excuse for inaction."
"Right now, we are seven
days away from thousands of American workers having to walk off the job
because Congress hasn't passed a transportation bill. We are eight days
away from nearly seven and a half million students seeing their loan
rates double because Congress hasn't acted to stop it," Obama said.
"This makes no sense."
For weeks, Obama has
ridiculed Republicans for not moving quickly to prevent student loan
interest rates from doubling, a stance that Democrats have hoped will
boost his support among young voters who broadly backed him in the 2008
election. With college costs and student debt growing steadily, the
issue ties directly into concerns about the economy and jobs that polls
show dominate voters' worries.
Though some rank-and-file
GOP lawmakers have opposed letting the government set the rates,
Republican presidential challenger Mitt Romney and GOP congressional
leaders have backed the one-year extension. The remaining dispute has
been over how to pay for it.
Republicans have accused
Obama of creating a phony issue and drawing out the battle in an attempt
to reap political points. In late May, they proposed several options to
pay for the measure, all of which were culled from budget savings Obama
himself had proposed in the past, but they said the White House was
ignoring them.
"Even though the White
House refuses to respond to our bipartisan approach, Senate Democrats
are finally working with us, and a solution is within reach - despite
the president's failure to act," said Don Stewart, spokesman for Senate
Minority Leader Mitch McConnell, R-Ky.
The talks have involved
aides to McConnell and Senate Majority Leader Harry Reid, D-Nev.
Democrats said the White House has been kept abreast of the talks, while
Republicans said House Speaker John Boehner, R-Ohio, has been kept
informed but hasn't participated in the negotiations.
According to Democratic
aides, negotiators are approaching a deal to cover the bill's costs by
charging companies more to insure pensions and changing rules so
companies take fewer tax deductions for their pension contributions.
Reid proposed both of those ideas this month.
They said additional money
would come from a list of options McConnell has offered, probably one to
limit federal subsidies of undergraduates' loans to six years. The
government does not begin charging interest on Stafford loans until
after students graduate, which can take longer than six years.
"While we're not there,
we're well down the road. I think we can get something done," Reid told
reporters Thursday. He said McConnell and Boehner "are compromising just
as we are and hope we can get something done."
If allowed to double, the
higher 6.8 percent rate would apply only to new subsidized Stafford
loans for undergraduates approved starting on July 1 and would not
affect existing loans.
According to the Education
Department, 7.4 million students are expected to get new Stafford loans
in the year beginning July 1, with each borrowing an average $4,226. A
doubling of interest rates would add about $1,000 to the costs of the
average loan, which students typically pay off over 10 or more years.
The Federal Reserve Bank of
New York said last month that student loan debt grew this year to $904
billion, even as other types of consumer debt were falling.
