The U.S. Senate is reported to be near a bipartisan compromise regarding student loan interest rates, but it is unclear if the Senate and the U.S. House will be able to find common ground before July 1.

On Monday, the interest rate will increase from 3.4% to 6.8% for federally subsidized Stafford loans without legislative action.

After a year of work on finding a solution and several proposals from both chambers, both parties, and the President it appears there may be emerging a compromise in the Senate. A proposal is circulating that would establish market-based interest rates that split the difference between the Administration’s plan and an earlier proposal put forth by Senate Republicans.

The proposal  would base interest rates on the 10-year Treasury note: undergraduate Stafford loans would have an interest rate of the 10-year Treasury rate plus 1.9 percentage points. Based on Tuesday’s 10-year Treasury note, that would lead to undergraduate loans with an interest rate of about 4.5 percent. Graduate and parent PLUS loans would have higher rates. Rates would vary from year to year for new loans, but remain fixed over the life of the loan.

The House Republican plan is based on similar principles, but would reset the interest rate each year for existing loans based on market conditions — a truly variable rate.

Senator Tom Harkin, the Iowa Democrat who chairs the Senate Committee on Health, Education, Labor and Pensions, was said to be a major hurdle. Harkin is now circulating a market-based proposal of his own. Harkin’s plan would include an interest rate cap — said to be a deal-breaker for Senate Republicans.

The question is whether House Republicans would support the bill. House Republicans have so far been unwilling to support legislation that increases the deficit within the five-year window — the reason their interest rate bill included a variable rate for student loans that resets each year.

If a Senate compromise can’t get enough support to pass the House before the July 1 deadline, Congress could also reach a retroactive compromise that affects loans the Education Department has already made.