WASHINGTON (CNN) -- — An agreement to stave off the doubling of interest rates on some student loans is unlikely before a July 1 deadline, despite a late push by a handful of lawmakers to reach a compromise, senators from both parties said Wednesday.
"Time is running out but we're still working on it," said Sen. Jack Reed, D-Rhode Island.
Nevertheless, many of those same senators said they hope to finalize an agreement shortly after Congress returns from its July Fourth recess and have it apply retroactively so students are not hurt by the temporary hike.
"It would be retroactive," promised Sen. Richard Burr of North Carolina, speaking about the tentative agreement he reached with a small bipartisan group of senators but that Senate Democratic leaders oppose.
Rates for the loans in question, government subsidized Stafford loans, are set to rise to 6.8% from 3.4% if a deal isn't reached. The hike would hit about seven million new loans this year for middle and low income students to pay for college, according to Senate Democrats. It would not apply to existing loans.
Negotiators are stuck largely on the question of whether to require an overall cap above which interest rates on new loans could not rise. Top Senate Democrats want a cap in place to protect students if interest rates spike. That is at odds with the slightly different proposals from President Obama and various congressional Republicans, which are tied to 10 year Treasury bonds and would include charges for administrative costs but would not include caps.
Republicans, who prefer a more market-based approach, were thrilled to find the White House's proposal more in line with theirs.
"Why Senate Democrats continue to attack the president's plan is a mystery to me," said Don Stewart, a spokesman for Senate Republican Leader Mitch McConnell. "But I hope he's able to persuade them to join our bipartisan effort to assist students."
Another disagreement centers on whether the legislation is revenue neutral. Senate Democrats are insisting the government not earn any money or pay down the deficit from the loans they provide, something that would happen under the other proposals.
"Republicans continue to insist that we reduce the deficit on the backs of students and middle-class families," said Adam Jentleson, a spokesman for Senate Democratic Leader Harry Reid.
Sen. Tom Harkin, D-Iowa, who chairs the Senate committee that deals with education policy, is pushing for a two year extension of the 3.4% rate so that lawmakers have time to fully address a host of higher education issues. He also hopes that after senators finish the time and energy-consuming immigration debate, they'll be able to more fully focus on student loans.
"We probably can't get anything done this week," Harkin said Tuesday. "If Republicans will agree to a cap, I think we could get this done in a heartbeat."