Lawmakers and their top aides have been tinkering with various proposal - nudging here, trimming there - trying to find a deal that avoids added red ink for students and the government alike.
The deal was estimated to reduce the deficit by $715 million over the next decade.
Undergraduates last year borrowed at 3.4 percent or 6.8 percent, depending on their financial need. Graduate students had access to federal loans at 6.8 percent and parents borrowed at 7.9 percent.
Under the deal, all undergraduates this fall would borrow at 3.85 percent interest rates. Graduate students would have access to loans at 5.4 percent and parents would be able to borrow at 6.4 percent.
But if the economy improves as congressional economists predict, rates would climb in coming years. The compromise reached Wednesday evening would limit how high those rates could go, although all were higher than the current fixed levels.
Lawmakers from both parties met with Obama and Vice President Joe Biden on Tuesday at the White House. An outline of an agreement seemed to be taking shape Tuesday, with follow-up meetings Wednesday in Democratic Sen. Dick Durbin's office yielding a final agreement.
Democratic Sen. Joe Manchin of West Virginia and Republican Sen. Richard Burr of North Carolina were the main negotiators, with Republican Sen. Lamar Alexander of Tennessee and Durbin filling the role of mediators.