Senate leaders reach deal on student loans

WASHINGTON – The Senate’s top Democrat and Republican said Tuesday that they’ve reached a deal that would prevent interest rates on college loans from doubling beginning this weekend for millions of students. But House Speaker John Boehner, R-Ohio, has yet to decide whether the pact will be acceptable to his Republican-run chamber.

The agreement, if approved by Congress, would spell an end to one of this election-season’s higher profile conflicts between President Barack Obama and congressional Republicans.

Under the agreement, interest rates for new subsidized Stafford loans would remain at 3.4 percent through next June 30.

Without congressional action, interest rates on the loans would double to 6.8 percent for new loans beginning July 1, this Sunday, for the 7.4 million students the government estimates would get such loans over the next year.

That increase, should it occur, would not affect loans currently held by students. The higher rate would cost the average student an extra $1,000 over the life of the loan.

About $5 billion of the measure’s $6 billion cost would come from Democratic pension-related proposals, including a change in how companies compute the money they must set aside to fund their pensions. The change would make their contributions more consistent year to year and in effect lower them – which business desires – and result in fewer corporate tax deductions for those payments.

In addition, fees that companies pay to have their pensions insured by the quasi-government Pension Benefit Guaranty Corp. would rise to reflect increases in inflation.

The remaining funds would come from a GOP plan to limit federal subsidies for Stafford loans for undergraduates to six years.