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WASHINGTON (UNDATED) -- Senate Majority Leader Harry Reid said the Senate could approve as early as Thursday a bipartisan compromise to change the student loan program to tie it the financial market and prevent loan rates from doubling this year.

"The legislation as presented to me isn't everything I want, but it's the work of a number of Democratic and Republican senators working long, long hours," said Reid, D-Nev.

The deal was announced late Wednesday, and although it has lukewarm support among liberal Democrats, it is likely to pass Congress and be signed by President Obama because without action students will face higher interest rates on loans this school year.

A senior House GOP aide said House leaders were checking with rank-and-file members Thursday to make sure the bill had support in the House, but that it was likely to pass because it mirrors House-passed legislation. A vote in the House was more likely next week, the aide said. The aide was not authorized to speak publicly because a final decision on the bill has not been made.

On July 1, rates doubled from 3.4% to 6.8% because Congress could not reach an accord on how to address the loan rates. House Republicans approved in June a bill to tie loan rates to the financial markets, and a similar proposal gained steam among Senate Republicans and a handful of Senate Democrats.

Obama endorsed the principle in his budget, which added momentum to the proposal. Liberal Democrats were wary of the proposal because they say it could allow rates to rise higher than the current 6.8% rate set by Congress, and reasoned that doing nothing was better than creating a new process that could allow for higher interest rates and tie student loans to potentially volatile changes in the financial markets.

A final deal was reached after Democrats secured additional protective caps on interest rates.

Under the agreement, federal student loans will be calculated and fixed to the 10-year Treasury bill. Undergraduates will pay an additional 2.05% with an 8.25% interest rate cap; graduate students will pay an additional 3.6% with a 9.5% interest rate cap; and PLUS loans, which mainly affect parents of college students, will pay an additional 4.6% with a 10.5% interest rate cap.

Under this program, all undergraduates this fall would borrow at 3.85% interest rates. Graduate students would have access to loans at 5.4%, and parents would be able to borrow at 6.4 %.

The law affects about 7 million students attending college this fall. While Reid does not fully support the terms of the deal, he said the bill would put an end to the political jockeying in Congress over student loans. "If we do this, it's not where we'll be back to next year, it will be done. We won't be back two years from now, it will be done," he said.

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