A bipartisan coalition of senators has reached a tentative deal over student loans, Senate aides told ABC News, a move that could avert a major rate increase when students start classes next month.
The deal tentatively reached Wednesday night with Senate negotiators would keep student loan rates steady through the 2015 academic year. But rates, which will be tied to financial markets, would climb in following years.
The proposal awaits final approval, pending a review of its cost by the Congressional Budget Office. But aides said the plan would be cost-effective for the loans, which are overseen by the government and will affect more than seven million students.
Democrats won a guarantee, aides told ABC News, that rates would never climb higher than 8.25 percent for undergraduate students. Graduate students would not see their rates exceed 9.5 percent, and parents' rates would cap at 10.5 percent.
The agreement still must be resolved with the House of Representatives, which earlier this summer passed its own plan tying rates to the 10-year Treasury note while allowing rates to fluctuate according to the market throughout the life of the loan, a point Democrats and the White House opposed.
Rates on subsidized Stafford loans doubled from 3.4 percent to 6.8 percent at the start of the month after the Senate failed to reach an agreement on the student loan program, which was extended for one year last summer.
Last week, a bipartisan group of senators assembled a plan that was eventually deemed too costly by the Congressional Budget Office, sending the group back to the drawing board on a way to keep student loan rates low.