Student loan deal close -- with or without federal pension hike

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Senate leadership is inching closer to a compromise on how to pay for a one-year extension of reduced federal student loan interest rates, and a proposal to bump up federal retirement contributions is likely still on the table.


According to reports in National Journal and Politico, Senate Republican and Democratic leaders are close to reaching a compromise on extending the current federal Stafford student loan interest rate of 3.4 percent for one year. Lawmakers are facing a July 1 deadline for the extension.

Lawmakers agree on the need for a one-year extension, which would cost approximately $6 billion, but have sparred in recent months over the best way to fund it. In May, the Republican leadership wrote a letter to President Obama outlining alternatives to Democratic-backed proposals, which they opposed.

Under one Republican-backed proposal, federal retirees in both the Civil Service Retirement System and the Federal Employees Retirement System would contribute 0.4 percent more to their pensions in calendar years 2012 through 2015, totaling a 1.2 percent increase over current contribution levels.

The House also passed a bill in May that includes a 5 percent pension hike phased in over five years for both CSRS and FERS employees.

Sen. Dick Durbin, D-Ill., told Politico that lawmakers are considering previous proposals from Democrats and Republicans, as well as new alternatives to fund the interest rate extension, but could not elaborate on the plans. The House will consider the measure after the Senate reaches an agreement.

Senate Majority Leader Harry Reid, D-Nev., also has offered pension-related proposals to fund the extension; his offer would change the formula for companies' required pension plan contributions, freeing up more taxable income, while also increasing their premiums paid to the Pension Benefit Guaranty Corp. to insure plans against default. According to reports, the Republican leadership is considering that proposal. Capitol Hill staff members could not confirm whether or not the federal employee pension cut was still under consideration.

Labor unions are continuing to watch the debate closely. Both the American Federation of Government Employees and the National Treasury Employees Union oppose the measure and asked the White House in May to reject the proposal, calling it another attack on federal employees from congressional Republicans.

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