BOSTON — Congressional leaders have reached a tentative deal to extend lower interest rates on federal student loans for another year, but that hasn’t stopped both sides in Massachusetts’ contentious Senate contest from again seizing on the issue.
Democratic hopeful Elizabeth Warren on Wednesday said she was glad Republicans in Congress “finally agreed with Democrats” on the importance of keeping student loan rates from doubling, while at the same time faulting them for waiting until the last minute.
“In the last few months, the national Republicans have shown that they are willing to go to the mat to protect tax breaks for big oil companies and for billionaires while at the same time dragging their feet until the eleventh hour when college students’ futures are at stake,” Warren said in a statement.
Republican U.S. Sen. Scott Brown issued a letter to Warren, calling on her to support the bipartisan compromise to extend the lower rate for student loan, even though it doesn’t raise taxes.
“I recognize that the agreement does not raise billions in new taxes on small family-owned businesses, which was clearly your stated preference,” Brown said in the letter. “I hope now that we are so close to a bipartisan solution, you will put politics and your devotion to higher taxes aside, and join me.”
In his criticism of Warren, Brown was apparently referring to an earlier Democratic plan that would have paid for the rate extension by raising Social Security and Medicare payroll taxes on high-earning owners of some privately held companies and professional practices.
Democrats and Republicans are both hoping to avoid what would be a politically risky move in an election year of allowing interest rates on new subsidized Stafford loans to double from 3.4 percent to 6.8 percent beginning this Sunday.
About 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.
Under a tentative agreement among congressional leaders, the government would raise $5 billion to pay for the loan extension 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. .
Democrats in particular have used the issue to blame Republicans, who in turn have accused Democrats of playing politics in an election year.
During the course of the months-long debate, Brown voted against Democratic proposals to extend the rate, while pushing a version of the bill that he said would have extended the lower rates without raising taxes. A Congressional Budget Office review of a similar proposal, however, found it would create net savings for the federal government of only several million dollars, far short of the $6 billion needed.
Democrats have tried to use Brown’s votes to try to portray him as indifferent to the needs of struggling students, while Brown has painted Warren as too eager to raise taxes.