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Interest rates for some student loans would be reduced under HR 5, adopted by the House of Representatives on January 17. One of the elements of the Democratic "Six for '06" agenda, the bill would reduce gradually the interest rate on new subsidized loans secured by undergraduate borrowers from the current 6.8 percent to 3.4 percent between July 2007 and July 2011. The interest rate for these loans would return to 6.8 percent in January 2012 unless legislation were passed to extend the lower rates. Under new Congressional budget rules instituted earlier this month, the cost of the legislation must be fully offset, so the bill’s $6 billion price tag would be paid for by increasing fees and reducing certain subsidies paid to student loan providers. 

Proponents of the legislation argued that once the lower interest rate was fully phased in, in mid-2011, it would save the average borrower with $13,800 in debt roughly $4,400 in interest over the life of his or her loan. Critics, including the White House, argued that the bill did nothing to reduce college costs and that, by targeting the benefit to college graduates rather than using the resources to increase the Pell Grant, it did not expand access to a college education.

The legislation now goes to the Senate, where Sen. Edward M. Kennedy (D-MA), chairman of the Senate Health, Education, Labor, and Pensions Committee, has indicated that he plans to consider the interest-rate issue as part of a broader legislative package that he will put before his committee as early as February.

Among other early action on Capitol Hill, both the House and Senate have made significant changes to their internal rules, including those on gifts, travel, and earmarks. While House and Senate provisions are not identical, they share several key themes. Both houses would generally ban the acceptance of any gift from a lobbyist or an organization that retains or employs a lobbyist. In addition, significant new restrictions would limit the ability of members of Congress and their staff to participate in travel that is paid for by outside organizations. An exception to this rule was provided in the case of travel expenses paid directly by an institution of higher education, and for trips that did not include more than one overnight stay. House and Senate negotiators will have to reconcile only those proposals that change the law. Other provisions that change the internal rules of either the House or Senate go into effect without presidential action.

Also included in these proposals are new disclosure requirements for bills that include earmarks, or targeted tax and tariff breaks. Under the proposed changes, legislation that comes before the House or Senate must include a list of any earmark, tax or tariff break, and the name of the member of Congress who requested the provision. When making a request for an earmark, a member will be required to submit a statement to the appropriate committee, which must include the name or identity of the beneficiaries, the purpose of the earmark, and a certification that the sponsoring member (and spouse) has no financial interest in the requested earmark. Final action of these proposals is expected to occur in February.

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