The Senate has struck a deal that lets college students avoid higher interest rates on federal loans, ending a weeks-long standoff between Majority Leader Harry Reid, D-Nev., and members of his own party.

After several days of closed door meetings, a bipartisan group of eight senators on Thursday afternoon introduced a proposal that links interest rates to the 10-year Treasury note. The setup means rates would increase over time, unlike the current system that locks in rates. But caps would be set on how high the rates could climb.

The interest rate on new federally subsidized Stafford loans jumped to 6.8 percent on July 1 from 3.4 percent after Congress failed to agree on a plan to keep the rates from rising. The increase means an extra $2,600, on average, for students.

Reid wanted a one- or two-year rate freeze of 3.4 percent, while limiting loans to only students who demonstrated financial need. But the Senate rejected his plan last week.

Meanwhile, Republicans and a handful of Democrats had been pushing a plan that linked rates to the financial markets and allowed all students  regardless of their financial situation  to borrow money from the federal government at discount rates.

Reid finally relented Thursday and said he will sign off on the deal.

“I’ve admired what they’ve done,” Reid said shortly after the group announced its plan. “Is it what I want? I’d rather have something a little different. But I’m going to take this because that’s what we do. We’re legislators, we compromise.”

The majority leader said he’ll bring the proposal to the Senate floor “as soon as we can,” which likely will be early next week.

Senate Minority Leader Mitch McConnell, R-Ky., offered lukewarm praise for Reid but chastised him and Senate Democrats for “prioritizing politics over helping students.”

“This is an issue that should’ve been a bipartisan slam dunk,” McConnell said. “The Senate Democrats’ obstruction and the president’s inaction resulted in a stalemate that was finally broken this week after Senate leaders decided to stop using students as pawns in a political chess match."

White House spokesman Jay Carney said the administration was “actively involved in urging senators to find a compromise.”

Sen. Joe Manchin, D-W.Va., who was among the leaders of the Senate group, said the compromise shows that bipartisanship isn’t dead in the increasingly polarized Senate.

“When Democrats and Republicans work together and have a real debate on a real problem, we can come up with common-sense solutions that benefit all Americans,” he said. “It is refreshing that on such an important issue we stopped playing politics with our students’ future.”

Sen. Tom Coburn, R-Okla., called the compromise a win for both students and taxpayers.

“Tying interest rates to the market allows students to take advantage of historically low rates while ensuring taxpayers will not have to foot the bill for arbitrary rates set by Congress,” he said.

The deal would allow all undergraduates to borrow money at a 3.85 percent interest rate, while graduate students would pay 5.4 percent. Those rates would climb as the economy improves and it becomes more expensive for the government to borrow money.

Rates for undergraduates would be capped at 8.25, while the rate for graduate would not climb higher than 9.5 percent.

The proposal is similar to a House-passed bill and a proposal offered by President Obama.

House Speaker John Boehner, R-Ohio, has indicated he will support the plan, saying “clearly it follows the structure of the House bills.”

“When we see the details I’m hopeful that we will be able to put this issue behind us,” he said.