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On Thursday Sep. 27 the U.S. House of Representatives passed a major financial aid reform bill that would end the Federal Family Education Loan program, which subsidizes private college loans while increasing the amount of federal financial aid.  Rep. George Miller (D-CA) called “the single largest investment in federal student aid ever.” Rather than relying on private lenders to make most student loans, the Student Aid and Fiscal Responsibility Act (SAFRA) has the federal government making student loans through the Direct Loan Program and puts money that had been spent on lender subsidies back into financial aid programs. 

According to the bill, this centralization will save $80 billion over the next 10 years and many claim that it will effectively shield student loans from the volatile fluctuations of the credit markets. This savings will be used to fund alternative programs and projects to benefit higher education such as Pell grants, the Federal Perkins Loan Program and new improvements to the nation’s community colleges, Historically Black Colleges and Universities (HBCUs), and early childhood education.

Though the bill passed with easy bipartisan support in the House, it still faces obstacles as it goes to the Senate. Fiscal conservatives have attacked the new bill as being irresponsible in its spending mandate and further claim that the bill will cost the private lending industry thousands of jobs.

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More from the Federal Family Education Loan Program Website