Congress passes student loans, highway jobs bill

Friday - 6/29/2012, 8:26pm EDT

By ALAN FRAM and JOAN LOWY
Associated Press

WASHINGTON (AP) - Congress emphatically approved legislation Friday preserving jobs on transportation projects from coast to coast and avoiding interest rate increases on new loans to millions of college students, giving lawmakers campaign- season bragging rights on what may be their biggest economic achievement before the November elections.

The bill sent for President Barack Obama's signature enables just over $100 billion to be spent on highway, mass transit and other transportation programs over the next two years, projects that would have expired Saturday without congressional action. It also ends a bare-knuckle political battle over student loans that raged since spring, a proxy fight over which party was best helping voters muddle through the economic downturn.

Obama signed a one-week temporary measure Friday evening, permitting the highway and loan programs to continue until the full legislation reaches his desk.

Under the bill, interest rates of 3.4 percent for subsidized Stafford loans for undergraduates will continue for another year, instead of doubling for new loans beginning on Sunday as scheduled by a law passed five years ago to save money.

Had the measure failed, interest rates would have mushroomed to 6.8 percent for 7.4 million students expected to get the loans over the coming year, adding an extra $1,000 to the average cost of each loan and antagonizing students _ and their parents _ four months from Election Day.

The Democratic-led Senate sent the measure to Obama by a 74-19 vote, just minutes after the Republican-run House approved it 373-52. The unusual display of harmony, in a bitterly partisan year, signaled lawmakers' eagerness to claim credit for providing transportation jobs, to avert higher costs for students and their families and to avoid being embarrassed had the effort run aground.

This year has seen the two parties mostly drive each other's plans for tax breaks and economic revival into a stalemate, although lawmakers have enacted bills retaining the Social Security payroll tax cut for a year and renewing a government agency that promotes U.S. exports.

"It's important for Congress to act, not just talk about problems we have but to get things done," said Rep. John Mica, R-Fla., a chief House author of the transportation measure.

"We have a bill that will boost this economy," said Sen. Barbara Boxer, D-Calif., a sponsor who said the measure would create or save 2.8 million jobs. "We have a bill that is supported by conservatives and liberals, progressives and moderates. I think this is a great day."

All the no votes were cast by Republicans.

The compromise ended up sprinkled with unrelated nuggets dealing with Asian carp, roll-your-own tobacco and federal timber aid. But its most significant provisions dealt with transportation and student aid.

The final transportation measure dropped a provision _ which had drawn an Obama veto threat _ that would have forced government approval of the controversial Keystone XL oil pipeline from Canada to the Texas coast. But it contains curbs on environmental reviews of transportation projects. Republicans sought those curbs in hopes of cutting construction time almost in half.

The bill consolidates federal transportation programs and gives states more flexibility in spending money from Washington. It also contains an array of safety initiatives including requirements aimed at enhancing bus safety. And it makes advocates of bike and pedestrian paths compete for money with other transportation projects.

White House spokesman Jay Carney said the administration was glad Congress acted "before middle class families pay the price for inaction." He said Obama will keep pressing for approval of more of his job-creating proposals from last year, to hire teachers, police officers and firefighters and for tax credits to companies that hire new workers.

Most of the overall measure was financed by extending federal taxes on gasoline and diesel fuel for two more years. Those levies, unchanged for nearly two decades, are 18.4 cents a gallon for gasoline and 24.4 cents for diesel and now fall well short of fully financing highway programs, which they were designed to do.

About $20 billion would be raised over the next decade by reducing tax deductions for companies' pension contributions and increasing the fees they pay to federally insure their pension plans. In return, a formula was changed to, in effect, let companies apportion less money for their pensions and to provide less year-to-year variation in those amounts.

To raise other revenue, the government will start charging interest on subsidized Stafford loans no more than six years after undergraduates begin their studies. Today no interest is charged until after graduation, no matter how long that takes.