(CNN) -- Senate negotiators were closing in on an agreement Friday to extend for one year lower interests rates on some student loans, Senate aides from both parties told CNN.
The aides predicted a deal would be reached and the legislation approved before the July 1 deadline when Stafford loans are set to double from 3.4% to 6.8%.
Democratic and Republican lawmakers have agreed for weeks to extend the low rates but have differed on how to off-set the $6 billion in federal subsidies so they don't increase the deficit.
"Senate Democrats are finally working with us and a solution is within reach," said Don Stewart, a spokesman for Sen. Mitch McConnell, the Republican leader.
A Democratic aide said negotiators were close to an agreement that would draw ideas from both parties for offsetting the costs. They would include higher fees businesses would pay to the federal government to insure pensions, something that Democrats proposed. And limiting the length of time students get for an in-school interest rate subsidy, something Republicans proposed.
In the Republican-led House, leaders have publicly pressed for the Senate to pass their version of the bill, which draws money from a preventative health care fund in the health reform law. But they have also left open the option of bringing up for a vote whatever compromise Democrats and Republicans in the Senate reach before the deadline.
The news was less positive for passage of the highway bill, the mammoth funding bill for roads, bridges and highways. A Democratic aide said while much progress has been made on the bill, GOP insistence on including a provision related to the Keystone pipeline could prove insurmountable.
If they can't reach a quick agreement, lawmakers will have to pass an extension before leaving for their July 4 recess at the end of next week. They must also decide if that extension should just be for about a month so negotiators can try to strike a deal in July or if it should be for six months, as House Republicans want, so the issue will be settled at least until after the election.