WASHINGTON — Along with the major health care legislation, the House on Sunday approved a major revamping of federal student loan programs that eliminates fees paid to private banks to act as intermediaries.
Instead, the government will expand a direct lending program, a step that the Congressional Budget Office said would save taxpayers $61 billion over 10 years, and use the money to increase Pell grants for students.
The student loan bill is a centerpiece of President Obama’s education agenda, and it was included in the budget reconciliation measure that also made final revisions to the Senate-passed health care bill.
The bill sets automatic annual increases in the maximum Pell grant, scheduled to rise to $5,975 by 2017 from $5,350 this year. The new Pell initiative also includes $13.5 billion to cover a shortfall caused by a steep rise in the number of Americans enrolling in college and seeking financial aid during the recession.
In last year’s budget resolution, Congressional Democrats put forward a plan to complete major education and health care legislation through a reconciliation bill.
The budget reconciliation rules set goals for reducing future federal deficits, and the loan bill helps to meet those goals by redirecting $10 billion in savings from subsidies to private banks toward deficit reduction.
The student loan bill will spend an additional $36 billion on Pell grants over 10 years.
Private banks lobbied against the student loan changes, which eliminate a long-flowing source of revenue for them.
Some Democrats, including Representative George Miller of California, the chairman of the Education and Labor Committee, said the student loan measure represented a landmark shift in education policy that was getting overshadowed by the larger health care fight.
In a floor speech, Mr. Miller called the budget reconciliation measure “truly historic legislation that addresses two of America’s greatest troubles: the crushing costs and high obstacles of obtaining both quality health care and a college education.”