A bipartisan group of lawmakers Thursday will introduce a compromise student loan proposal aimed at preventing a massive increase in student loan interest rates on July 1.

The proposal, which was hammered out over the past week by Sens. Joe Manchin, D-W.Va., Angus King, I-Maine, Tom Coburn, R-Okla., Richard Burr, R-N.C., and Lamar Alexander, R-Tenn., draws from formulas for setting future interest rates that have been proposed by President Obama and House Republicans in a bill they approved last month.

Interest rates for subsidized undergraduate loans, which are currently fixed at 3.4 percent, will rise to 6.8 percent on July 1 unless Congress acts.

The Bipartisan Student Loan Certainty Act ties interest rates on new student loans to the 10-year Treasury note and adds an additional 1.85 percent to subsidized and unsubsidized undergraduate Stafford loans. The proposal adds 3.4 percent to the Treasury rate for graduate Stafford loans and 4.4 percent for PLUS loans, which are issued to parents of students.

"This bipartisan agreement not only makes sure student rates will not double on July 1, but this is a long-term fix that will lower rates for all students and will save students $30 billion over the next three years, making sure anyone who wants an education can afford one," Manchin said in a statement. "This deal shows the American people that bipartisanship and commonsense are alive in Washington."

The plan would fix the interest rate for the life of the loan, and it also maintains a cap on interest rates for consolidated loans at 8.25 percent. It reduces the deficit by $1 billion over 10 years, according to the Congressional Budget Office.

For weeks, Republican leaders in the House had hounded Democrats for their failure to approve an alternative proposal that would address the impending rate hike. The Republican proposal, which was modeled after a plan Obama included in his 2013 budget, also set interest rates to the 10-year Treasury note but tacked on a higher 2.5 percent "add on" to those rates. The proposal also allowed rates to fluctuate according to the market throughout the life of the loan, which Democrats and Obama strongly opposed.

But the new bipartisan proposal still faces opposition from Democrats in the Senate.

A spokesman for Sen. Harry Reid said Wednesday that the bill could not pass the Senate.

"There is no deal on student loans that can pass the Senate because Republicans continue to insist that we reduce the deficit on the backs of students and middle-class families, instead of closing tax loopholes for the wealthiest Americans and big corporations," said Reid spokesman Adam Jentleson. "Democrats continue to work in good faith to reach a compromise, but Republicans refuse to give on this critical point."

Save for calling on Congress to prevent interest rates from doubling on July 1, the Obama administration has not publicly said how it would like the issue resolved.

Some Democrats, including Chairman of the Health Education, Labor and Pensions Committee Sen. Tom Harkin of Iowa, has expressed an unwillingness to hammer out a long-term compromise now, preferring to temporarily extend the current rates for another two years, buying Congress more time to deal with the issue.

Harkin has also said that he opposed tying interest rates to the 10-year Treasury note.

Allison Preiss, a spokesman for Harkin said that the proposal is a nonstarter.

"Sen. Harkin is not interested in proposals that ask low- and middle-income college students and their families to pay even more in interest to reduce the deficit, and tie student loans to unrestricted interest rates," Preiss said. "Any proposal that lacks a cap is a nonstarter and indicates that its proponents are putting their ideology above students and their families."

The new bipartisan proposal is expected to be officially offered in the Senate on Thursday, although it is unclear whether it could be approved in time to avoid a rate increase on Monday.

Burr said he did not think the Senate would act before adjourning for a weeklong recess on Friday. But he said if an agreement was reached next month, it would be retroactive so the increases wouldn't take effect.

"This agreement lowers rates for America's students and families," Burr said. "Let's put the politics aside and pass this bill."