Washington (CNN) -- A Democratic measure to temporarily reverse the doubling of interest rates on millions of government-backed student loans fell short in the U.S. Senate on Wednesday, but there was hope a bipartisan deal would be struck soon to remedy the situation.
"We're trying to find some common ground," said Sen. Richard Durbin of Illinois, the No. 2 Democratic leader who spearheaded fresh talks on the dispute. "We don't have an agreement and I can't say when or if we'll come together."
Sen. Richard Burr of North Carolina, a GOP member of the group seeking a deal, believes there are some options that "seem to pique a lot of interest in a bipartisan way."
Democrats needed the support of 60 senators in a test vote on a proposal backed by the White House to temporarily return rates for subsidized, need-based Stafford loans to 3.4 % to give lawmakers more time to work out a long-term fix for a number of higher education affordability issues.
It never had much of a chance because all 46 Republicans opposed it as did some Democrats and was easily defeated.
Interest rates on the subsidized financing for low-income students doubled on July 1 because of congressional inaction to hold them steady heading into the next school year.
Far more students take out unsubsidized student loans from the government -- those rates have been at 6.8% since 2007.
Student loan debt has skyrocketed in recent years, as have delinquencies, making it a pressing political and financial issue for millions of Americans. Many young graduates are deep in debt and without jobs.
Student loan debt is second only to mortgages as the largest debt that consumers carry.
For the class of 2013, much of the debt is in government loans with graduates owing an average of $26,000, according to a Fidelity survey of 750 college graduates.
The new rates apply for loans beginning after July 1.
Opponents of the Senate Democratic remedy said it would have just deferred hard decisions and kept rates low for a short time.
They prefer a permanent change to how interest rates are calculated for the millions of undergraduates, graduate students, and parents who take out government loans each year.
Bipartisan talks were triggered after top White House officials, including Chief of Staff Denis McDonough and Education Secretary Arne Duncan, met with Senate Majority Leader Harry Reid and other Democratic leaders Tuesday night.
Negotiations are aimed at sifting through the various proposals for interest rates, surcharges, and whether to mandate a cap on how high rates could rise, a key demand from Democrats.
"These things move in tandem," explained Durbin. "As you lower the cap you raise the rates. And vice versa. As you raise the cap you lower the rates. So we're trying to find the right spot that works for everyone and we're still working on it."
Sen. Tom Carper, another member of the bipartisan group, said Republicans appeared ready to compromise by accepting a rate cap.
"There is a good spirit and I think the interest is in finding a way to yes," the Delaware Democrat said.
House Republicans, who prefer that markets set rates, pushed through a measure in May that ties rates to the bond market and caps them at 8.5 %.
This summer's fight is similar to the one that took place last year when Congress acted to avert an increase in the middle of a presidential campaign.