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June 26, 2012 – 11:02 p.m.

Student Loan Deal Needs a Vehicle

By Lauren Smith and Nathan Hurst, CQ Staff

Senate leaders said Tuesday that they reached a deal to prevent student loan interest rates from doubling, but negotiators struggled over whether to attach that issue to a still-unfinished compromise to reauthorize highway programs.

“We basically have the student loan issue worked out,” Majority Leader Harry Reid, D-Nev., said. “The next question is: What do we put it on to make sure we can complete it? There are a number of suspects we have, but right now we don’t have that worked out yet.”

Meanwhile, differences on proposals to streamline the process of permitting transportation projects remained the biggest impediment to finishing a highway bill conference report. House negotiators continued to hold out for more concessions aimed at relaxing environmental reviews of projects.

Negotiations continued late Tuesday with the goal of producing a report on the measure (HR 4348) on Wednesday, in time to get it cleared this week. The current extension of highway programs (PL 112-102) and the break on student loan rates both expire July 1.

“We’re down to a few issues,” Senate Environment and Public Works Chairwoman Barbara Boxer, D-Calif., told reporters Tuesday afternoon.

House conferees met early Tuesday evening with Speaker John A. Boehner, R-Ohio, to discuss the state of negotiations. After the session, Deputy Whip Bill Shuster, R-Pa., said he was “pretty confident something will come together.”

“There are a lot of pieces to this, and trying to get them all put together right now is what we’re trying to do,” added House Transportation and Infrastructure Chairman John L. Mica, R-Fla.

But an industry lobbyist and two Republican aides said a six-month extension of authorization — which would push the issue off until after Election Day — is ready to go if conferees aren’t able to reach agreement by Wednesday evening. There are no shorter-term extensions being readied in the House at this time.

The House late Tuesday rejected, 172-225, a motion by Minority Whip Steny H. Hoyer, D-Md., to instruct conferees to simply take up the Senate-passed highway bill (S 1813). Hoyer has argued that the measure that passed easily in the Senate with bipartisan support could clear the House with backing on both sides of the aisle if Boehner would bring it to a vote. The non-binding vote was designed to highlight divisions in the GOP caucus and pressure House conferees to show flexibility.

Measures Could Be Combined

The idea of combining the two packages emerged earlier this month, with the expectation that the offsets for the student loan measure — which would exceed the $5.9 billion cost of that deal — would help pay for surface transportation programs.

Attaching the student loan language to a conference report also would ensure that the measure could not be held up by Senate procedural moves. Senate leaders would need 60 votes to bring up a conference report for a vote, but rules bar any efforts to amend it. The Senate passed its highway bill in March with 74 votes, but it was unable to get 60 votes for an earlier Reid-sponsored version of the loan rate extension that would have offset the cost with an elimination of a tax preference for S corporations — a proposal Republicans opposed.

House members, meanwhile, were relatively silent on the efforts taking place in the Senate. Republican leaders and their aides consistently have said they would not discuss their response on the student loan measure until the Senate had sent a bill to the House. Boehner may face a challenge in limiting GOP defections on the prospective measure, which raised objections from many conservatives when the House initially considered the bill (HR 4628) in April.

Student Loan Deal Needs a Vehicle

“We’ll see what the Senate does, and respond,” Boehner spokesman Michael Steel said Tuesday.

The agreement reached this week would use two pension-related maneuvers to offset the cost of the bill, as well as a Republican proposal to reduce the amount of time that students are eligible for an in-school interest subsidy.

The first pension offset — which the Senate approved in March as a way to fund its transportation bill (S 1813) — would change the method used to determine how much money businesses must invest in employees’ defined-benefit pension plans. It could generate as much as $9.5 billion, but according to a Senate Democratic aide, only $5 billion would be used to help pay for the student loan bill.

The other offset would come from an increase in the premiums paid by employers for the insurance provided by the Pension Benefit Guaranty Corp., which could generate up to $8 billion. But the aide said only $500 million would be put toward student loans.

The third offset is pulled from a package of proposals offered May 31 by Republican leaders in both chambers. It would generate $1.2 billion, all of which would help pay for the interest rate extension, by shortening the amount of time that full-time and part-time students are eligible for an in-school interest subsidy on their student loan. The idea had been included in the president’s fiscal 2013 budget request, with direction that the savings would be used to shore up a shortfall in Pell grants, a federal student aid program for low- to middle-income students.

McConnell insisted that any agreement must include at least one offset proposed by Republicans, a higher-education lobbyist said Tuesday.

In addition to paying for the student loan initiative, any remaining funds from those two pension offsets could go toward a highway bill compromise. The Senate-passed transportation bill is projected to need about $12 billion in offsets to cover expenditures that exceed projected Highway Trust Fund tax receipts over two years. The legislation being negotiated in conference is expected to be largely based on the Senate bill.

“We’re pleased that the Senate has reached a deal to keep rates low and continue offering hard-working students a fair shot at an affordable education,” the Obama administration said in a news release. “We hope that Congress will complete the legislative process and send a bill to the president as soon as possible.”

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