Republicans propose federal pension hikes to fund student loan program

House Republicans have proposed increasing federal retirement contributions by 1.2 percent over the next three years to pay for a one-year extension of the reduced interest rate for student loans.

In a letter to President Obama dated Thursday, Republicans from both chambers of Congress rejected Senate Democrats’ proposal to pay for a one year extension of a reduced interest rate for subsidized Stafford student loans with a tax hike on small businesses. Republicans suggested three alternatives to the tax hike, the first of which targets federal employees’ pension contributions.

“We believe our alternative is reasonable and responsible, but in the interest of finding common ground,” Republican lawmakers wrote.

Under the proposal, those in the Civil Service Retirement System and those in the Federal Employees Retirement System would contribute 0.4 percent more to their pensions in calendar years 2012 through 2015. This would add up to a 1.2 percent increase over current contribution levels. The House passed a bill earlier this month that includes a 5 percent pension hike phased in over five years for CSRS and FERS employees.

Both the National Treasury Employees Union and the American Federation of Government Employees asked the White House to reject the proposal, calling it another attack on federal employees from congressional Republicans. “Pension contribution increases amounting to $15 billion in additional revenue were recently enacted to offset a temporary extension of unemployment benefits. Federal employees have done more than their share to help address our budget shortfalls; shortfalls that were not caused by them,” NTEU President Colleen Kelley said in a letter to the president.

AFGE President John Gage called the proposal an “unjustified income tax” in his letter to the White House. “Not only is federal retirement entirely unrelated to student loan interest rates, requiring federal employees to pay more for their retirement benefit is nothing more than an unjustified income tax increase on one small segment of the population, the working and middle class Americans who make up the federal government’s workforce,” Gage wrote.

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