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Showdown time again in Congress on student loans, highways

Action is needed by week's end to keep students' interest rates down and construction money flowing.

June 26, 2012|By Lisa Mascaro, Washington Bureau
  • “Lots to do — a very short time to do it,” said Senate Majority Leader Harry Reid (D-Nev.), as Republicans and Democrats battle down to the wire on student loan interest rates and federal highway funding.
“Lots to do — a very short time to do it,” said Senate… (Brendan Hoffman, Getty…)

WASHINGTON — Congress often waits until the last possible minute to make tough decisions, and that moment arrives this week for two crucial issues that have become political pawns.

Action is needed by Saturday to prevent student loan interest rates from doubling for 7 million college undergraduates. If nothing is done, students' payments would increase by $1,000 a year, on average. Also by week's end, Congress must reach agreement on the federal highway program, or the money stops.

Lawmakers are struggling to make deals on the measures, which Democrats and Republicans both say they support.

"Lots to do — a very short time to do it," Senate Majority Leader Harry Reid (D-Nev.) said Monday.

The reason for the delay is clear: Neither party has much to gain from an early compromise on the debates that have prevented agreement because neither wants to be criticized for caving.

Republicans, for example, want to pay for the subsidized student loans by cutting other domestic programs that Democrats want to protect. Highway funding is being targeted for reductions by the GOP, while Democrats want to maintain road and infrastructure development.

Each party hopes the other blinks.

The likely result is another showdown in Congress, which for the last 18 months has been defined by its penchant for lurching from crisis to crisis.

At the White House, the administration was optimistic Monday that lawmakers would resolve the standoff on student loans — an issue President Obama has frequently highlighted as he seeks to win over young voters and middle-class families ahead of the November election.

"We remain confident that Congress will do that, and that student loan rates will not double," Press Secretary Jay Carney said. "But there is certainly concern that only a few days remain before those loan rates double."

Talks are underway between Reid and Sen. Mitch McConnell of Kentucky, the Republican Senate leader, on a framework for the student loan deal, aides say.

Both the GOP-led House and the Senate, which the Democrats control, have approved bills to keep so-called Stafford loan rates at 3.4%. But the bills take different approaches to paying for the program.

Under the contours of an agreement, the $6-billion cost would be covered through proposals from both sides, which could include increases to the amount employers pay for a pension guaranty program, as well as loan limits on part-time students or those who stay in school longer.

House SpeakerJohn A. Boehner(R-Ohio) has chided Obama for stoking a controversy over college loans. He insists there is no dispute because Republicans also want to keep interest rates low. But a final agreement still could prove difficult.

As has happened repeatedly in this Congress, Boehner faces a restive Republican majority powered by a conservative flank that is skeptical of government programs and spending.

This dynamic has stymied talks on the highway bill. The $109-billion measure, which would pay for highway and transit projects for two years, passed with bipartisan support in the Senate in March but has run into turbulence in the House.

Failure to approve a highway measure would halt the government's ability to collect the federal gas tax that pays for transportation construction and improvements. It is unclear what the loss of the 18.4-cent-a-gallon tax would mean for prices at the pump, but it would stall needed work on infrastructure.

Boehner has suggested punting on the highway bill by approving an extension that would continue the funding until after the November election. Democrats have rebuffed that overture but, with the deadline looming, may decide to accept.

lisa.mascaro@latimes.com

Times staff writer Richard Simon in Washington contributed to this report.

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