U.S. Senate majority leader, Sen. Harry Reid (D-Nev.), proposed last week to pay for both the highway bill and student loan rate extension by increasing pension premiums for employers and creating a more flexible pension-accounting scheme. Republicans are not so sure. “If that offset is used in the student-loan issue, it is not available for the highway bill,” said Senate minority whip, Sen. Jon Kyl (R-Ariz.).
Both Reid and House of Representatives speaker, Rep. John Boehner (R-Ohio), have suggested they would prefer student loans over a highway bill if forced to choose. Boehner wants a six-month extension of highway authority, and Reid has said that if House Republicans cannot get it together on a highway bill, they might as well work on student loans.
Needs-based student-loan interest rates will double from 3.4 percent to 6.8 percent on July 1, unless Congress acts. President Obama and his Republican challenger, Mitt Romney, have said that keeping the interest rate low is a top priority. A one-year freeze costs $6 billion; however, highway authority also has to be extended, with the June 30 deadline for doing so rapidly approaching. Without an extension of the highway authority, money would cease to flow into the Highway Trust Fund and large summer transportation projects would stop resulting in thousands of layoffs.
Senate Health, Education, Labor, and Pensions Committee Chairman Tom Harkin (D-Iowa) said that Democrats lack patience for continued haggling over how to cover the cost of the student-loan bill. “I don't know why they would have some counteroffer,” he said of Reid's offer. “I mean, if they are going to come back with some wacko, off-the-wall offset like the prevention fund, then it will be clear to me. If they don't accept this-one of them, we've got two of them ... then I think the game is clear. They really want the interest rates to go up so they can blame Obama.”
Republican aides say the same thing about the Democrats. They do not believe that White House officials and, by extension, congressional Democrats, want to negotiate.
Until Congress can come to an agreement, the fate of both provisions remains in limbo.