By Ted Barrett, CNN

Washington (CNN) - A bipartisan group of senators announced an agreement on a student loans package Thursday that would cap rates, ending a standoff that lasted months and broke through a July 1 deadline for finding a solution.

Under the compromise measure, undergraduate students would pay a rate of 3.85% next year on subsidized and unsubsidized Stafford loans. The plan would cap rates on loans to undergrads at 8.25%, for graduate students at 9.5% and parents at 10.5%.

"While this is not the agreement that any of us would have written, and many of us would like to have seen something quite different, I believe we have come a very long way on reaching common ground," Sen. Dick Durbin of Illinois, the Democratic whip in the Senate, said at a press conference Thursday.

Sen. Tom Harkin, the Democratic chairman of the committee that oversees federal education programs, also was present in announcing the deal. The Iowa senator had resisted for weeks agreeing to a plan unless it included caps on how high the interest rates on the loans could rise.

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