In the potential compromise, interest rates would be linked to 10-year Treasury notes, plus an added percentage — just like Obama's proposal, as well as those from House and Senate Republicans.
When students sign for loans each academic year, their interest rate would be locked in for the life of that year's loan. For instance, students could wind up paying a higher interest rate for their sophomore year than their freshman year if the economy continues to improve and 10-year Treasury rates increase.
Students from lower-income families are eligible for subsidized Stafford loans, in which the government covers interest costs while they are in college. Those loans make up about a quarter of all federal student lending.
At the end of their studies, students could consolidate their loans, as is the case now. The current system caps that rate at 8.25 percent and lawmakers were considering keeping that in place.