WASHINGTON (CBS/AP) -- Heading off a costly rate increase for returning college students, a bipartisan group of senators reached a "tentative" deal Wednesday that would offer students better rates this fall but perhaps assign higher rates in coming years, CBS News has confirmed.
It would offer students lower interest rates through the 2015 academic year, but would be retroactive.
After the 2015 academic year, rates were expected to climb above where they were when students left campus this spring.
The interest rates would be linked to the financial markets, but Democrats won a protection for students that rates would never climb higher than 8.25 percent for undergraduate students. Graduate students would not pay rates higher than 9.5 percent and parents' rates would top out at 10.5 percent.
Parameters of the deal were described to CBS News by Republican and Democratic aides.
Word of an agreement was first reported by The Associated Press.
Sources tell CBS News the legislation's wording is still being finalized, and senators are waiting for the nonpartisan Congressional Budget Office to "score" the pact's financial impact.
Some estimates have the deal reducing the federal deficit by $715 million over the next decade.
Negotiators hope they will be able announce a deal as early as Thursday. It is still unclear when it would come to the floor.
The aides tell CBS News President Obama and Republicans agree on the main points of a deal, but there are some Democrats who cannot support it.
The bipartisan agreement is expected to be the final step in a string of efforts that have emerged from near constant work to undo a rate hike that took hold for subsidized Stafford loans on July 1. Rates for new subsidized Stafford loans doubled from 3.4 percent to 6.8 percent, adding roughly $2,600 to students' education costs.
Lawmakers from both parties called the hike senseless but differed on how to restore the lower rates. Republicans have pushed for a link between interest rates and the financial markets. Obama included that link in his budget proposal, as did House Republicans. Democrats balked, saying it could produce government profits on the backs of borrowers if rates continued to climb.
Leaders from both parties, however, recognize the potential to be blamed for the added costs in the 2014 elections if nothing is done.
The House has already passed student loan legislation that also links interest rates to the 10-year Treasury note. The differences between the Senate and House versions are expected to be resolved before students return to campus this fall.
Few students had borrowed for fall classes. Students typically do not take out loans until just before they return to campus and Congress had until they left for the August recess to restore the lower rates.
Lawmakers and their top aides have been tinkering with various proposal -- nudging here, trimming there -- trying to find a deal that avoids added red ink for students and the government alike.
Undergraduates last year borrowed at 3.4 percent or 6.8 percent, depending on their financial need. Graduate students had access to federal loans at 6.8 percent and parents borrowed at 7.9 percent.
Under the deal, all undergraduates this fall would borrow at 3.85 percent interest rates. Graduate students would have access to loans at 5.4 percent and parents would be able to borrow at 6.4 percent.
But if the economy improves as congressional economists predict, rates would climb in coming years. The compromise reached Wednesday evening would limit how high those rates could go, although all were higher than the current fixed levels.
Lawmakers from both parties met with Mr. Obama and Vice President Biden on Tuesday at the White House. An outline of an agreement seemed to be taking shape Tuesday, with follow-up meetings Wednesday in Democratic Sen. Dick Durbin's office yielding the final accord.
Democratic Sen. Joe Manchin of West Virginia and Republican Sen. Richard Burr of North Carolina were the main negotiators, with Republican Sen. Lamar Alexander of Tennessee and Durbin filling the role of mediators.