WASHINGTON - A congressional Republican says the House and Senate have tentatively agreed to prevent interest rates on new college loans from doubling to 6.8 percent this Sunday.
The one-year extension of the existing 3.4 percent rate on subsidized Stafford loans is the same package that Senate Majority Leader Harry Reid, a Nevada Democrat, and Senate GOP leader Mitch McConnell of Kentucky said on Tuesday they had worked out.
Earlier Wednesday, House Speaker John Boehner, an Ohio Republican, said Wednesday that lawmakers were near agreement. The congressional Republican who discussed the tentative deal spoke on condition of anonymity because it had not been announced.
The $6 billion measure would be paid for by curbing companies' tax breaks for pension payments and limiting federal subsidies of student loans.
The deal would affect new loans starting July 1, affecting an estimated 7.4 million students.
Boehner, R-Ohio, made his remarks a day after the Senate's Democratic and Republican leaders said they'd reached a deal to prevent interest rates on new subsidized Stafford loans from doubling to 6.8 percent, beginning this Sunday. Their bipartisan agreement — which the White House backed — put pressure on Boehner to accept the deal, which if enacted would avoid antagonizing millions of students and their parents in an election year.
Separately, the government's authority to spend money on highways, bridges and transit systems expires Saturday, as does its ability to levy gasoline and diesel taxes. Bargainers have been working for months in search of compromise on that measure, but have been stymied by disputes over environmental reviews of highway projects, the proposed Keystone oil pipeline from Canada to Texas and other issues.
"We're moving, I think, towards an agreement on a transportation bill that would also include a one-year fix on the student loan rate increase," Boehner told reporters after meeting behind closed doors with House Republicans.
Without action by Congress, interest rates on subsidized Stafford loans would double from their current 3.4 percent for 7.4 million students expected to receive such loans in the year beginning July 1. The loans, used by lower- and middle-income students, are usually paid off over more than a decade, and the higher rates would cost the typical student around $1,000 over the course of the loan.
President Barack Obama highlighted the student loan issue during visits to college campuses this spring amid a campaign year in which the struggles of many families to cope with the limp economy has been a defining issue. Hoping to prevent him from using the dispute in the fall campaign, GOP presidential challenger Mitt Romney said in April that he backed an extension of the lower rates. GOP congressional leaders said the same.
In recent weeks, the key dispute has been over how to pay the student loan bill's $6 billion price tag.
Under the agreement, the government would raise $5 billion by changing the way companies calculate the money they have to set aside for pensions. That change would make their contributions more consistent from year to year, in effect reducing their payments initially and lowering the tax deductions they receive for their pension contributions.
Another $500 million would come from increasing the fees companies pay for the government to insure their pension plans, linking those fees to inflation.
In addition, $1.2 billion would be saved by limiting federal subsidies of Stafford loans to six years for undergraduates.
The White House threatened to veto a House-passed bill extending the lower interest rates because it was paid for by cutting a preventive health care program that Obama helped create. Republicans blocked a Democratic version in the Senate paid for by boosting taxes on owners of some privately held corporations.
Congressional leaders are discussing combining the student loan bill with the highway legislation. Any extra funds raised by the student loan measure could help pay for the highway legislation.
House and Senate negotiators are discussing extending federal highway and transit programs for two years. Both parties consider the measure the best bet for congressional approval of legislation creating jobs before the November elections.
Rep. Bill Shuster, R-Pa., a House transportation committee member, said lawmakers were waiting to see the final language of the bill, which was still being written Wednesday morning, before signing off on a deal.
The last long-term transportation bill expired in 2009. Congress has kept programs going through a series of nine short-term extensions.
The bill would overhaul transportation programs, giving states more flexibility in how they spend federal money, step up the pace of road construction by shortening environmental reviews, impose new safety regulations and boost funding for a federal loan guarantee program aimed at increasing private investment in highway and other transportation construction projects.
The Senate passed a bipartisan, $109 billion transportation bill in March. House Republicans were unable to pass their own comprehensive transportation bill because of divisions in their party.
Instead, they passed a three-month extension of current programs coupled with controversial provisions that would have required the government to approve the Keystone XL oil pipeline and blocked the Environmental Protection Agency from regulating the toxic ash created by coal-burning power plants.
The White House threatened to veto the bill if it includes the Keystone provision.